Australia's manufacturing sector continues to defy the doomsayers

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Activity levels across Australia’s manufacturing sector have now strengthened for 12 straight months, marking the longest period of expansion seen in close to a decade.


The latest manufacturing purchasing managers’ index (PMI) released by the Ai Group rose by 0.8 points to 51.8 in June.

The index measures changes in activity levels from one month to the next. Anything above 50 signals growth, while anything below that level means contraction -— so the higher the number the better.

It has now held above the 50 level for a year, something that has not been seen since September 2006.

The chart below shows the impressive trend. Not a bad performance by any stretch, particularly given the grim outlook many saw for the sector only a few years ago.

Like the headline index, the survey’s internal subindices were, on balance, strong, particularly when it came to production and new orders.

At 54.1, the new orders subindex was particularly robust. As a lead indicator on future levels of activity, things are looking bright.

The table below, supplied by the Ai Group, reveals the internal movements within the survey. As is the case with the headline PMI, figures above 50 indicate that activity levels are expanding. The group uses 3-month moving averages for the subindices to provide a better indication on the overall trend in each component.

Adding to the robust report, the Ai Group notes that six of eight manufacturing subsectors saw activity levels expand in June, indicating that the continued improvement across the sector was broad based in nature.

“The mild expansion of manufacturing in June capped a year in positive territory for the Australian PMI,” said Innes Willox, CEO of the Ai Group.

“It was a year in which manufacturers took advantage of the boost to competitiveness from the lower Australian dollar both in the domestic market and in export markets.”

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