Australia AI Manufacturing Index Expands More; Employment Up

- Respondents Citing Headwinds From Rising AUD

     SYDNEY (MNI) -  - From Australia Industry Group's Australian Performance of

Manufacturing Index for July published Tuesday:

                          July  Change from June

------------------------------------------------

Australian PMI            56.0              +1.0

Production                59.0              +1.7

New Orders                55.8              -3.7

Employment                57.4              +8.4

Inventories               49.0              +4.7

Supplier Deliveries       54.0              -3.4

Average Wages             55.7              -4.7

Input Prices              69.3              +4.4

Selling Prices            50.0              +2.9

Exports                   53.9              -0.7

Sales                     55.8              -5.1

Capacity Utilization (%)  76.3              -0.9

     FACTORS: The manufacturing index rose more in July to remain in expansion

territory for the 10th consecutive month as employment rose and production

expanded. Seven out of eight subsectors expanded in July in trend terms with

nonmetallic mineral products, which are mainly building materials, rising by 1.9

points to 67.3. The subsector is supported by nonresidential building

construction but respondents said stronger competition from imported products

was emerging as a result of rises in the exchange rate. The large machinery and

equipment subsector continues to be supported by increased construction activity

in New South Wales and Victoria as well as a bigger pipeline of renewable-power

projects. Food and beverages continued its long run of expansion but respondents

said the stronger Australian dollar had curbed their rate of growth. Among

subindexes sales expanded for a sixth consecutive month and exports rose mainly

owing to food and beverages and metal products. Input prices rose but wages fell

to a less expansionary 55.7 and manufacturing rose to a neutral 50.0 points.

     TAKEAWAY: Construction, agriculture and large government-funded projects

are providing a positive source of demand for the manufacturing industry along

with a strong pipeline of solar- and wind-power projects. But there are

headwinds, too, from energy costs, higher raw-material costs, international

competition, continuing weakness in the retail sector and, more recently, the

rising Australian dollar. The Reserve Bank of Australia's monthly cash rate

decision is due later Tuesday where it may attempt to talk the currency lower by

pointing to elevated levels.

     COMMENTS: AI Group Chief Executive Innes Willox said the broadly based

expansion of manufacturing continued and the subsectors supporting growth more

than offset the decline of motor-vehicle assembly. "They are also, at least for

the time being, helping to mitigate the growing threats from unrelenting energy

price rises and a higher dollar," he said.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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