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Strong export demand drives manufacturing activity

Strong export demand drives manufacturing activity article image

Manufacturing activity picked up in August, driven by rising exports and increasing levels of production.

"While it is only expanding at a modest pace, the further growth in manufacturing in August is heartening and, together with a rise in new orders, will help allay fears of a further slowdown in business conditions," Ai Group chief executive Innes Willox said after the release of Australian Performance of Manufacturing Index.

The overall PMI was up 1.8 points to 53.1 in August, above the 50-point mark that separates expansion and contraction in activity, after a 1.9 per cent rise in July.

Exports rose 1.1 point from the previous month to 55.7 – hitting a 10-month high.

And new orders also expanded at a higher pace over the previous month – up 0.3 points to 53.3.

Building, wood & furniture manufacturing and food & beverages production continued as the fastest growing sectors.

Machinery & equipment producers and manufacturers in the petroleum & chemicals group also reported improved performance.

The lift across these sectors was partly offset by sharply negative conditions in the metal and textiles & paper product groups, Mr Willox said.

Key findings

All seven activity indexes in the Australian PMI® indicated expansion in August, with production (up 4.9 points to 53.2) and sales (up 11.6 points to 54.3) rising back into positive territory.

  • Four of the six manufacturing sectors expanded in August (trend) with the food & beverages (down 1.7 points to 55.8) and building materials, wood & furniture (down 0.5 points to 59.6) sectors still leading the way, but at slower rates of growth. The machinery & equipment sector improved after several months of poor conditions (up 1.6 points to 52.5) while metal products (down 0.3 points to 37.9) and TCF, paper & printing (down 0.6 points to 41.7) both fell to their lowest levels since 2013.
  • The input prices index was largely unchanged in August (down 0.1 point to 66.2), while the selling prices index rebounded 3.5 points to climb back into expansion at 52.7).
  • The average wages index rose by 3.4 points to 60.3 in August, indicating a higher proportion of businesses are facing wage increases across manufacturing – perhaps reflecting increases linked to this year's 3.0% minimum wage increase making their way through the system of industrial awards and agreements.

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