The fall in the Australian dollar is helping Australia's manufacturing sector to expand again

Australia’s women’s soccer team, the Matildas, celebrate a win. Photo: Getty Images

It’s easy to be bearish about the Australian economy. With perhaps the exception of our new prime minister and HSBC’s Paul Bloxham, it’s been fashionable to talk down the economy and consistently highlight the risks to the outlook.

The IMF did it again overnight with their Scorecard on the Australian economy possessing an underlying tone of negativity about the outlook for the economy. So it’s easy to miss the subtle good news we are seeing from Australian business.

This morning’s release of the AiGroup’s Performance of Manufacturing Industry Index (PMI) again highlights the improvement in Australia’s business climate.

The PMI for August rose 0.4 to 52.1 in September. That’s the third month in a row that Australia’s manufacturing sector has expanded and the AiGroup says it’s the first time this has occurred since July 2010.

The break up of the survey shows:

Six of the seven activity sub-indexes expanded in September:

  • New orders (up 0.5 points to 53.4);
  • Production (up 0.5 points to 51.7);
  • Manufacturing sales (up 4.6 points to 53.2);
  • Supplier deliveries (up 0.9 points to 53.9);
  • Employment (down 0.6 points to 50.7); and
  • Exports (up 4.6 points to 53.2).

The seventh activity index showed manufacturers ran down their inventory levels for an eighth consecutive month.

AiGroup CEO Innes Willox said this is good news for an economy “searching for sources of growth outside of mining.” He also said the lower Aussie dollar is clearly doing its work with “local producers winning against imports in the domestic market and making further progress in export markets.”

“Last month the Australian dollar was about 10 per cent lower than the average for the first half of the calendar year and against the Trade Weighted Index, the domestic currency was around 7 per cent lower in September,” he said.

This data will encourage the RBA that the Aussie dollar is doing what it should and the economy is transitioning as they had hoped.

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