The Australian Performance of Manufacturing Index (Australian PMI) shows that the manufacturing sector nudged growth in June.
According to these figures from Australian Industry Group, the June PMI was 49.6 – up 5.8 points from the figure for May (readings below 50 indicate a contraction in activity).
The improvement in the overall reading was largely due to an expansion in production (50.2) from the previous month, and improvements in the new orders index (49.9) and supplier deliveries (49.6).
However, despite falls in the Australian dollar, manufacturing exports continued to struggle.
In three month moving average (3MMA) terms, five of the eight sub-sectors improved in June, but no sub-sectors expanded (i.e. no sub-sectors had readings over 50 points, in 3MMA terms).
Printing & recorded media was the best performing sub-sector in June (48.5 points, 3MMA) while metal products (34.3 points, 3MMA) again recorded the lowest reading.
Sub-indexes for production (50.2) and inventories (52.2) moved above the benchmark 50 point level that indicates expansion and the new orders sub-index (49.9) firmed by 7.6 points.
The exports (30.3) and employment (46.9) sub-indexes continue to indicate contraction.
Ongoing pressure on margins was indicated by the continued expansion in the wages sub-index (53.8) and the input prices sub-index (56.4) and the contraction in the selling prices sub-index (44.8).
Ai Group Chief Executive, Innes Willox, said: “The unexpected lift in the Australian PMI is a welcome, though tentative, sign that manufacturers’ efforts to fight back against the severe pressures facing the industry are beginning to pay off. The Reserve Bank’s reductions in the cash rate appear to be supporting a weak pick-up in local demand and the drop in the exchange rate may be assisting domestic producers in the local market. Export conditions, however, remain extremely challenging.
“This month’s improved reading (just short of the benchmark 50 points indicating growth) comes after two years of continuous decline and after two months of especially weak Australian PMI readings in April and May. However, there is a need to be cautious about a single month’s reading, particularly because the inventory sub-index expanded strongly again in June, suggesting that sales are still lagging behind production.