Australia’s manufacturing sector made an impressive comeback to expansion in July, according to a key index.
The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) for July was 50.4, up from the June reading of 44.2.
Readings over 50 represent growth in the sector, while anything under 50 correlates with contraction. The figure for July, therefore, just crosses into expansion territory, but represents a 14 per cent increase from the previous month.
Four of the seven activity sub-indexes expanded in July. Manufacturing sales (up 12.9 points to 53.9) expanded for the first time in 14 months, while production (up 10.6 points to 54.2) and supplier deliveries (up 6.3 points to 50.6) reversed sharp declines in June to return to expansion.
New orders (up 7.6 points to 49.8) also recovered lost ground to approach stability, but stock levels (down 1.7 points to 47.9) and manufacturing employment (up 2.6 points to 47.5) remained in negative territory.
The exports sub-index expanded for a third consecutive month (up 1.6 points to 51.8), reflecting the lower Australian dollar.
Three of the eight manufacturing sub-sectors expanded in July, led by food, beverages & tobacco (down 1.7 points to 58.9) for a 14th month. The relatively small wood & paper products sub-sector (up 4.4 points to 68.2) expanded for a fifth month, while petroleum, coal, chemical & rubber products (up 2.2 points to 50.7) returned to expansion after a brief contraction in June.
Ai Group Chief Executive, Innes Willox noted that the lower Australian dollar played a role in the result and helped lift exports.
“Healthy contributions from the food and beverages sector and industry segments linked to residential construction offset continued weakness in other areas including the important machinery and equipment sector,” he said.
“Machinery and equipment is suffering from the drop in demand from mining-related construction and the ongoing wind-down of automotive assembly."