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Run of growth for manufacturing sector

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The Australian manufacturing sector has recorded its longest unbroken run of expansion in a decade, spurred by a weaker Australian dollar.

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The Australian Industry Group’s performance of manufacturing index (PMI) edged up 0.8 points to 51.8 in June, remaining above the 50-level indicating the sector is expanding.

Factory activity has now been growing for 12 consecutive months – the longest unbroken run of expansion since 2006.

“The mild expansion of manufacturing in June capped a year in positive territory for the Australian PMI,” Ai Group chief executive Innes Willox said today.

“It was a year in which manufacturers took advantage of the boost to competitiveness from the lower Australian dollar, both in the domestic market and in export markets.”

Five of the PMI`s seven activity subindexes expanded in June, and did so at a faster rate than in May.

While the employment subindex remained in contraction, it rose 2.3 points, to 47.9, which means it contracted at a slower rate.

The deliveries subindex slipped into mild contraction June.

Six of the eight manufacturing subsectors reported growth, led by petroleum and chemical products and non-metallic mineral products.

However, the textiles and clothing and machinery, and the equipment categories both remained in contraction in June.

Meanwhile, the expansion of the largest subsector, food, beverages and tobacco, also slowed with respondents reporting excess supply in markets suppressing prices and dampening activity.

“There are now signs of a slowdown and the machinery and equipment subsector was weaker – in part due to the low levels of business investment across the economy and the gradual wind-down of auto assembly,” Willox added.

“The clear imperative for the sector is for a lift in investment, both within the sector itself and more broadly across the economy.”

-AAP

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