Australian PMI® - Manufacturing remains in the black in July

2 August 2010

The manufacturing sector entered its third quarter of growth in July on the back of stronger levels of production, new orders and deliveries. The seasonally adjusted Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) rose 1.5 points to 54.4 in July heralding a seventh straight month of growth in manufacturing (readings above 50 indicate an expansion in activity).

The transport equipment, fabricated metals, basic metals and machinery & equipment sub-sectors benefited from stronger demand in the mining and infrastructure sectors in the month. Encouragingly, consumer-related sectors also bounced back in July. However, the high exchange rate continues to affect manufacturers with exports falling in July.

Australian Industry Group Chief Executive, Heather Ridout, said: "The recovery in manufacturing continued in July despite the waning impacts of fiscal stimulus and above-normal business interest rates. Private sector demand is slowly re-emerging as a source of growth. While Australia remains the stand-out economy globally, the environment is also patchy and volatile and the world economy faces renewed uncertainty.

"Manufacturers will be looking for policies in a post-election environment that will help secure a full recovery in the sector and foster longer-term national productivity growth. Interest rates and fiscal policy need to be set to support further expansion," Mrs Ridout said.

PricewaterhouseCoopers Global Head of Industrial Manufacturing, Graeme Billings, said: "Manufacturers continue to regain lost ground and over the coming year need to look for business expansion opportunities by continuing to invest, innovate and upgrade the skills of their workforces. The sector faces important underlying challenges from international competition and the strength of the domestic currency due to the expected continued strength of commodity prices. These challenges call for a combination of long-term business strategies and supportive policy settings."

Australian PMI® Key Findings for July:
  • The manufacturing sector spent its seventh straight month in the black in July, with the seasonally adjusted Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) rising 1.5 points to 54.4 (readings above 50 indicate an expansion in activity).
  • Stronger growth in production, new orders and deliveries were behind July's result.
  • Mining and infrastructure related demand gave a lift to transport equipment, fabricated metals, basic metals and machinery & equipment sub-sectors.
  • An improvement in full-time employment growth over recent months is believed to have helped consumer-related sub-sectors, including textiles, bounce back in July.
  • Paper, printing & publishing was the fastest expanding sub-sector in the month.
  • The new orders sub-index grew 5.5 points.
  • The production sub-index lifted to 57.3.
  • After three months of growth, the employment sub-index fell modestly to 47.7.
  • Manufactured exports continue to be constrained by the higher exchange rate.
  • Growth was strongest in New South Wales, Queensland, South Australia and Tasmania.

Background

The Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) is a seasonally adjusted national composite index based on the diffusion indices for production, new orders, deliveries, inventories and employment with varying weights

An Australian PMI® reading above 50 points indicates that manufacturing is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline. Australian PMI® results for the third month of each quarter are based on an expanded sample (in excess of 500 companies). Results for the other months are based on responses from over 200 companies.

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