Construction, mining demand aiding continued manufacturing growth

construction

Australia’s manufacturing sector has experienced a tenth consecutive month of expansion – despite significant challenges.

The Australian Industry (Ai) Group’s Australian Performance of Manufacturing Index (Australian PMI) increased by 1.0 point in July to 56.0 points.

According to the index, results above 50 indicate expansion with even higher results indicating a stronger expansion.

In July, manufacturers cited increased demand from construction, mining (possibly reflecting commodity price increases) and agriculture for locally manufactured construction materials, machinery and equipment.

Large government funded projects in New South Wales and Victoria were also providing a positive source of demand, as is a strong pipeline of solar and wind power projects.

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However manufacturers across many sectors are seeing significant challenges from soaring energy costs, higher raw material costs (the flipside of higher commodity pricing), the stronger Australian dollar, the departure of automotive assembly, strong international competition, and ongoing weakness in the retail sector.

“The broadly-based expansion of manufacturing continued in July with the sector contributing positively to the rebalancing of the broader economy,” said Ai Group CEO Innes Willox.

“Production, sales, exports and employment all grew during the month, in part thanks to the strength of other key sectors including construction and agriculture, and the recovery of spending in the mining sector.

“These growth opportunities more than offset the further decline of automotive assembly. They are also, at least for the time being, helping to mitigate the growing threats from unrelenting energy price rises and a higher dollar.”