Manufacturing activity accelerated in July as stronger domestic demand fuelled higher production and employment, new figures show.
The Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index (PMI) rose in July by 4.3 points, to 57.4, to sit firmly above the key 50 level separating expansion from contraction.
Exports remained subdued, however, as the higher Australian dollar exerted a brake on growth.
It was the 14th straight month of expansion for the manufacturing sector.
The PMI showed that the strengthening in domestic activity was reflected in a broad-based improvement across the key indicators of manufacturing production, new orders, employment, finished stocks and deliveries.
Australian Industry Group chief executive Heather Ridout said the strengthening domestic economy was placing a solid floor under manufacturing activity.
Production expanded in all states, with Queensland, Western Australia and Tasmania reporting the strongest conditions.
"The upturn is welcome and has gained traction in recent months, although the improvement is somewhat patchy, with transport and machinery and equipment manufacturers, along with other metal manufacturers, facing weaker outcomes in the face of heightened competition from imports," she said.
"Furthermore, exports continue to struggle to maintain the gains made at the start of the year," she said.
Ms Ridout said stronger consumer spending, employment and construction activity have allowed manufacturers in the sectors of food and beverages, clothing and footwear, construction materials, chemicals, petroleum and coal products to benefit from solid orders, production and employment.
"As well, the stronger Australian dollar has helped to contain input cost rises," she said.
Activity expanded in eight sectors in July, compared with nine in June.
Growth was strongest in food and beverages and chemicals, and petroleum and coal products.
Activity declined in textiles, wood, wood products and furniture, fabricated metal products, as well as machinery and equipment.
PricewaterhouseCoopers global leader of industrial manufacturing, Graeme Billings, said now was a good time for companies to start to invest more of their growth dividends in new technology, processes and innovation.
The PMI showed that new orders, stronger customer demand, improved weather conditions, along with strengthening supermarket buying were the main contributors to better conditions.
"With strengthening import competition, a continuing focus on business improvement is imperative," he said.
"Companies need to undertake a diagnostic (sic) of their current operations, and to work to improve margins so that they can be sustained over the medium term.
"This will allow them to not only improve their operations, but to be able to tap into world best practice as well."
The Sydney Morning Herald (August 1, 2007)