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Manufacturing springs into growth

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The lower Australian dollar has helped lift the manufacturing sector into growth for the first time since July.

Australia’s manufacturing sector expanded in November, albeit very slightly, rising 0.7 points to 50.1, according to the Australian Industry Group’s performance of manufacturing index.

A reading above 50 indicates expansion while anything below suggests contraction.

The index has been in contractionary territory since July, when it had a short-lived bounce following an eight-month slump.

The latest bounce was a welcome sign of resilience in the sector, Ai Group chief executive Innes Willox said on Monday.

“The lower dollar, an easing in energy costs, moderate wages growth and relatively low interest rates are all helping to underpin the sector’s performance,”  Willox said.

Strong housing construction activity was also supporting the sector, Willox said.

But there were still “substantial headwinds with the steep decline in mining investment and the impending closure of Australian automotive assembly stifling business sentiment and the appetite for investment,” he said.

“Businesses also noted that the still-strong Australian dollar continues to support intense import competition.”

Four of the eight manufacturing sub-sectors expanded in November, including food and beverages, wood and paper products, textiles, clothing and furniture, and non-metallic mineral products.

Respondents to the survey said business sentiment and appetite for investment remained weak, while the boost from housing construction was being dampened by declining mining investment and car production.

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