The Commonwealth Bank of Australia’s latest Purchasing Manager Index (PMI) showed that the country’s manufacturing sector has improved despite remaining in contraction for the month of June. The initial PMI tallied Australian manufacturing at 49.8, up from 44.0 in May.
According to the CBA report the manufacturing sector neared stabilization in June, with much softer reductions in output, new orders and exports recorded. The rate of decline in employment remained sharp, however, as firms operated below capacity.
CBA Head of Australian Economics, Gareth Aird said: “The June results indicate we are now past the lowest point in economic activity. Overall conditions are still very soft, but there were some encouraging signs about further improvements still to come.”
“The further decline in employment was disappointing, but given the lagging relationship between employment and output it is not surprising. We should see headcount lift from here,” Mr. Aird said.
PMIs are important for predicting turns in the business cycle, especially for the manufacturing sector where activity tends to be cyclical in nature. The monthly survey, which began in May 2016, covers senior purchasing managers in 400 Australian companies in the manufacturing and services sectors.
According to CBA, manufacturers are surveyed each month on how output, orders, jobs, delivery times and stocks have changed relative to the previous month.
The growth of business activity in June comes with the easing of coronavirus restrictions leading to the resumption of operations in many firms and increase in the number of customers. The services sector showed the most promising results with a rise in activity for the first time in five months.