The Australian Industry Group Performance of Manufacturing Index (PMI) rose to 50.4 in July, which is an increase from the 44.2 in June.
The result is above the 50 level, which means that Australia’s manufacturing sector stabilised and turned to expansion in July, after contracting to a 22-month low in the previous month.
“The lower dollar was an important positive factor in the July turnaround in manufacturing performance which saw another lift in exports. Healthy contributions from the food and beverages sector and industry segments linked to residential construction offset continued weakness in other areas including the important machinery and equipment sector. Machinery and equipment is suffering from the drop in demand from mining-related construction and the ongoing wind-down of automotive assembly,” said Ai Group Chief Executive, Innes Willox.
According to Ai Group, four of the seven activity sub-indexes expanded last month: manufacturing sales went up 12.9 points to 53.9; production is also up 10.6 points to 54.2; supplier deliveries went up 6.3 points to 50.6; and new orders is up by 7.6 points to 49.8. Stock levels (down 1.7 points to 47.9) and manufacturing employment (up 2.6 points to 47.5) remained in negative territory. The exports sub-index expanded for a third consecutive month (up 1.6 points to 51.8), reflecting the lower Australian dollar.
Three of the eight manufacturing sub-sectors expanded in July, led by food, beverages & tobacco (down 1.7 points to 58.9) for a 14th month. The wood & paper products sub-sector (up 4.4 points to 68.2) expanded for a fifth month, while petroleum, coal, chemical & rubber products (up 2.2 points to 50.7) returned to expansion after a brief contraction in June.