The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) rose 1.8 points to 53.1 in August, driven by increasing levels of production and rising exports.

All seven activity indexes in the Australian PMI indicated expansion in August (readings below 50 points indicate contraction in activity, with the distance from 50 indicating the strength of the decrease), with production (up 4.9 points to 53.2) and sales (up 11.6 points to 54.3) rising back into positive territory. Both new orders (up 0.3 points to 53.3) and exports (up 1.1 point to 55.7) expanded at a faster pace than in July.

“Stronger production, sales, and employment combined in a small though encouraging lift in the Australian PMI for August,” said Ai Group Chief Executive Innes Willox. “While it is only expanding at a modest pace, the further growth in manufacturing in August is heartening and, together with a rise in new orders, will help allay fears of a further slowdown in business conditions.”

The input prices index was largely unchanged in August (down 0.1 point to 66.2), while the selling prices index rebounded 3.5 points to climb back into expansion at 52.7). The average wages index rose by 3.4 points to 60.3 in August, indicating a higher proportion of businesses are facing wage increases across manufacturing – perhaps reflecting increases linked to this year’s 3.0% minimum wage increase making their way through the system of industrial awards and agreements.

Four of the six manufacturing sectors expanded in August (according to trend data) with the food & beverages (down 1.7 points to 55.8) and building materials, wood & furniture (down 0.5 points to 59.6) sectors still leading the way, but at slower rates of growth. The machinery & equipment sector improved after several months of poor conditions (up 1.6 points to 52.5) while metal products (down 0.3 points to 37.9) and TCF, paper & printing (down 0.6 points to 41.7) both fell to their lowest levels since 2013.

“Building, wood & furniture manufacturing and food & beverages production continued as the fastest growing sectors while machinery & equipment producers and manufacturers in the petroleum & chemicals group also reported improved performance,” Willox said. “The lift across these sectors was partly offset by sharply negative conditions in the metal and textiles & paper product groups.”