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PMI: Manufacturing activity was stronger during July

03 August, 2007

Australia's manufacturing activity lifted in July, underpinned by stronger domestic demand, with the Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) rising 4.3 points to 57.4 (above the key 50.0 level separating expansion from contraction).

The strengthening in domestic activity was reflected in an improvement across the key indicators (excluding exports) of production, new orders, employment, finished stocks and deliveries.

Ai Group Chief Executive, Heather Ridout, said: "The strengthening in the domestic economy is placing a solid floor under manufacturing activity.  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.  Furthermore, exports continue to struggle to maintain the gains made at the start of the year," she said.

"Stronger consumer spending, employment and construction activity have seen manufacturers across food & beverages, clothing & footwear, construction materials and chemicals, petroleum & coal products benefit from solid orders, production and employment.  As well, the stronger Australian dollar has helped to contain input cost rises, with the sub-index falling to its lowest level in over two years," Ridout said.

PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said: "Now is the time for companies to start to invest more of the growth dividends into new technology, processes and innovation.

"With strengthening import competition, a continuing focus on business improvement is imperative. Companies need to undertake a diagnostic 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," Billings said.

Australian PMI® Key Findings for July:

-
The Australian PMI® rose 4.3 points in the month to 57.4, as stronger domestic demand fed into higher production and employment, more than reversing the moderate easing of the previous month. 

- The strengthening in activity was reflected in an improvement across all key indicators - production, new orders, employment, finished stocks and deliveries. Exports remained subdued as the higher Australian dollar placed a brake on growth. 

- Despite higher production, input costs moderated.  

- Companies cited new orders, stronger customer demand, improved weather conditions, along with strengthening supermarket buying, as contributing to better conditions.  

- Production expanded in all states, with Queensland, Western Australia and Tasmania reporting the strongest conditions.

- Activity expanded in eight sectors in July, compared with nine in June. Growth was strongest in food & beverages and chemicals, petroleum & coal products. Activity declined in textiles; wood, wood products & furniture; fabricated metal products and machinery & equipment. 

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