The Australian manufacturing sector has expanded for the first time in more than two years as the latest Performance of Manufacturing Index (PMI) from the Australian Industry (AI) Group showed an improvement by 5.3 points in September, rising to 51.7.
Record low interest rates, a weaker Aussie dollar and improving sentiment following the national elections have helped boost the demand for the industry’s products.
“The lift in manufacturing performance in September is very welcome news from a sector that has been under intense pressures from the strong dollar, high energy costs, uncompetitive unit labour costs and fragile demand in domestic and international markets,” said AI Group Chief Executive Innes Willox in a statement.
“While businesses reported only weak improvements and while there are risks in drawing conclusions from a single month’s data, there were encouraging indications from businesses that the easing in the dollar, low interest rates and the clear outcome of the federal election were lifting business sentiment.”
According to the AI Group, manufacturing’s recovery in September was driven by strong indexes in the new orders and supplier deliveries, which both moved above 50 points.
“The lift in the sector’s performance in September was more evident in forward-pointing indicators such as supplier deliveries and new orders rather than in current-period indicators such as production, employment and exports which continued to contract or were flat at best,” said Mr. Willox
“The key question is whether these tentative pointers to future growth are confirmed by further gains in manufacturing performance over the next few months.”
Expansion in the industry was strongest in the food, beverages and tobacco sub-sectors reaching 60.1 points, while the metal products and machinery and equipment continue to show severe contraction.
While the production sub-index improved by 2.8 points to 49.9 points, the latest PMI also revealed that most manufacturers remain unable to pass on their higher costs to customers with the selling price index recording 46.9 points, which means it continues to fall although at a slowest rate since February 2012.