PMI data suggests manufacturing sector is in best shape since 2002

Local manufacturing performance has surged to a 15-year high, as the PMI expands for a fifth straight month.

The monthly performance of manufacturing in the food & beverage sector swelled to a reading of 58.8 point, according to the AIG’s PMI data. Rachel Vavricek, assistant venue manager at James Squires' microbrewery in Russell St. (Picture: Tim Carrafa)

New figures suggest Australia’s manufacturing sector is in its healthiest shape in 15 years despite ongoing worries about the industry’s future.

The monthly performance of manufacturing index (PMI) from the Australian Industry Group showed an 8.1 point surge to a robust reading of 59.3 points in February.

The figure is the highest since May 2002, with the improvement in conditions showing as the fifth straight month of expansion.

Six of the seven subindexes expanded through the month, with the improvement driven by new orders and sales.

The only decline came in inventories as manufacturers struggled to keep up with the surge in demand.

Among the sectors measured by the survey, seven of the eight noted better conditions, with only printing and recording media remaining in contractionary territory below 50 points.

In contrast, food & beverage rose to a reading of 58.8 points, while non-metallic mineral products, machinery & equipment, metal products and petroleum, coal & chemical products all logged further improvement above 50 points.

Wood & paper products remained a laggard, but had recovered from contractionary levels after a challenging period.

“Comments from manufacturers in February indicate that demand looks to be increasing and confidence returning to some of the larger sub-sectors such as food processing and machinery and equipment (other than auto),” Ai Group said.

“Exports are continuing to provide a good source of growth, as are large transport infrastructure projects and increased activity in parts of mining and agriculture in response to the recovery in prices for bulk commodities, wool and some grains.”

Concerns linger around energy costs and reliability after a damaging blackout in South Australia late last year and a jump in prices on the east coast as the major LNG export projects consume plenty of the nation’s supply.

“On the inputs side, energy costs and energy reliability are posing a significant threat to ongoing profitability and viability for some manufacturers,” the industry body said.

“Rising raw materials costs and supply constraints are causing increased price pressure and delaying some supplies. Also, intense competition is continuing, particularly from overseas firms.”