Factory activity rises on improving demand

(Australian Associated Press)


Australian factory activity picked up last month on the back of improving demand and recovering commodity prices.

The Australian Industry Group’s performance of manufacturing index (PMI) rose 1.2 points to 55.4 in December, above the level of 50 points indicating an expansion in activity.

Ai Group chief executive Innes Willox said the only weak point for the manufacturing sector was a small fall in the employment subindex.

“Manufacturing production, sales, exports, and new orders all grew strongly in the month, providing a running start to the new year,” he said in a statement.

The survey showed that four of the five larger manufacturing sub-sectors, including food and beverages; petroleum, coal, chemicals and rubber products; non-metallic mineral products; and machinery and equipment showed healthy growth in the month.

However, printing and recorded media products slipped into contraction.

The metal products and textiles and clothing products sub-sectors also remained in the red in December.

The survey said comments from manufacturers indicated that demand appeared to be improving again after a weak patch in the latter half of 2016.

“The recovery in commodity prices has led to better conditions for manufacturers exposed to the mining sector, with some revival of mining investment and maintenance spending,” the survey said.

“However, surging energy costs, weaker local demand and slower spending on particular major projects is depressing activity for some manufacturers.”

Mr Willox said the positive result for producers of machinery and equipment in December came despite the unwinding of automotive plants and pointed to a tentative pick-up in business investment.

He said the early passage of the federal government’s Enterprise Tax Plan would provide important boost to manufacturing activity in 2017.


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