Australia's manufacturing sector smaller but performing well: Ai Group

Business Insider Australia reports that although it is smaller than it used to be, Australia’s manufacturing sector is “looking mighty”. The latest manufacturing purchasing managers’ index (PMI), released by the Ai Group on Monday, showed that in July the index surged by 4.6 points to 56.4, leaving it at the highest level since March this year.

The PMI measures changes in activity levels from one month to the next. Anything above 50 signals growth, while anything below that level means contraction — so the higher the number the better.

According to the Ai Group, the July result continued “a recovery in the manufacturing sector that has now been running for 13 months, marking the longest growth phase for the sector in well over a decade”.

It also acknowledged that the resilience was assisted by a more competitive Australian dollar, along with certainty brought about by the end of the federal election.

Notably the index measuring sales jumped to 59.8, marking the fastest increase seen since September 2009. There was also good news when it came to new export orders with the subindex surging to 59.5, the highest level seen since March 2008. And like the new exports figure, the new orders subindex also improved, increasing by 4.7 points to 58.8, while the deliveries subindex also jumped by 13.7 points to 62.6, the highest level seen in the history of the survey.

“Together with the stronger new orders subindex, this suggests manufacturers may be gearing up for more production,” said the Ai Group.

Perhaps as a result of the surge in new demand, the survey’s employment subindex rocketed to 56.5, an increase of 8.6 points on June. It now sits at the highest level seen since December 2004. Putting that another way, manufacturers added staff at the fastest pace seen in well over a decade.

Food, beverages and tobacco — the largest manufacturing sector in the country — saw growth slow fractionally over the month, falling one point to 52.7.

Innes Willox, CEO of the Ai Group, offered cautious optimism to the July result, suggesting that while the near-term outlook appears robust, it is largely recouping declines seen in the years following the global financial crisis.

“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,” said Willox.