The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) gained further momentum in July, increasing by 4.6 points to 56.4 to extend the manufacturing sector’s period of unbroken growth to 13 months.
The figures represent the longest phase of expansion for the Australian PMI since August 2004 (readings above 50 indicate expansion in activity and the distance from 50 indicates the strength of the increase). Six of the seven manufacturing activity sub-indexes expanded in July, with deliveries (up 13.7 points to 62.6), sales (up 6.1 points to 59.8), exports (up 9.0 points to 59.5), new orders (up 4.7 points to 58.8) and employment (emerging from contraction to 56.5 points) all expanding at a stronger pace (see table below).
“Manufacturing activity entered its second year of expansion in July with the Australian PMI recording gains in manufacturing production, sales, exports and employment during the month,” said Ai Group Chief Executive, Innes Willox. “The lower value of the local currency has been a key driver behind these gains.”
Six of the eight manufacturing sub-sectors expanded (that is, above 50 points in three-month moving averages), led by wood & paper products (up 1.9 points to 59.6), printing & recorded media (up 7.0 points to 57.2), petroleum & chemical products (down 4.8 points to 57.3) and non-metallic mineral products (down 1.4 points to 56.9). Food, beverages & tobacco eased by a point but remains in expansion (52.7 points). Machinery & equipment (up 3.5 points to 48.3) and textiles & clothing (down 0.8 points to 48.1) remained in mild contraction.
The input prices sub-index fell 4.8 points to 59.0 in July, suggesting relatively lower but ongoing price pressures. The wages sub-index increased 4.2 points to 59.7. The selling prices sub-index expanded further in July, climbing 1.7 points to 54.7 – combining with the easing in input prices to perhaps relieve some of the margin pressures long felt by manufacturers.
“The strong lift in new orders augers well for the sector’s immediate outlook and for a continuation of the role manufacturing is playing in the rebalancing of the broader economy,” Willox added. “However, the expansion over the past year has been only a partial recovery from the very serious slump in the years following the global financial crisis. Further substantial gains in manufacturing will require a lift in business investment both within the sector and across the broader economy.”