Positive signs in manufacturing report
Australia’s manufacturing sector showed some signs of life last month, an industry report shows.
The latest Performance of Manufacturing Index, released today, recorded 49.6 – up 5.8 points from the previous month (readings below 50 indicate a contraction in activity).
The last over-50 reading from the PMI was in June 2011.
“The unexpected lift in the Australian PMI is a welcome, though tentative, sign that manufacturers’ efforts to fight back against the severe pressures facing the industry are beginning to pay off,” Australian Industry Group chief executive Innes Willox said.
“The Reserve Bank’s reductions in the cash rate appear to be supporting a weak pick-up in local demand and the drop in the exchange rate may be assisting domestic producers in the local market.
“Export conditions, however, remain extremely challenging,” Willox said.
“This month’s improved reading (just short of the benchmark 50 points indicating growth) comes after two years of continuous decline and after two months of especially weak Australian PMI readings in April and May.
“However, there is a need to be cautious about a single month’s reading, particularly because the inventory sub-index expanded strongly again in June, suggesting that sales are still lagging behind production.
“Notwithstanding the very welcome fall in the Australian dollar over the past two months and the relatively low level of official interest rates, Australia remains a high-cost location for production and we need to generate a significant lift in productivity to restore competitiveness.
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“This is critical if the manufacturing sector is to contribute to the economic resilience and diversification required as the mining investment boom fades.”
The positive signs come despite recent closures announced in the car manufacturing industry in Victoria.
