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--Employment Sub-index Down Sharply, -7.8 points to 50.3
--AI Manufacturing Index Expands for 22 Straight Months But New Orders Ease
By Sophia Rodrigues
     SYDNEY (MNI)  - Following are the five main observations we made from
Australian Industry Group's Performance of Manufacturing Index for July
published Wednesday:
     --The index fell in July, down 5.4 points to 52.0 and while the industry
remained in expansion for 22 straight months, the pace has been dropping since
reaching a record high in March this year. 
     --Indicators linked to inflation point to subdued price pressures despite
wages rising due to the 3.5% increase in minimum wages. Input prices fell, down
2.2 points to 68.1, and selling price sub-index dropped 2.8 points to 53.0
suggesting price increases remain slow. This is despite capacity utilization
rising further in July to 79.8%, well above long-run average of 73.2%.
Employment sub-index fell 7.8 points to 50.3 points. This will be a key
sub-index to watch in coming months because employment growth is important to
the Reserve Bank of Australia's forecast for wage growth and thus inflation.
     --New orders fell significantly for the second consecutive month, down 6.5
points to 51.1, indicating growth will remain modest in coming months. The metal
products sub-sector saw fewer orders due to the end of the financial year but
this sub-sector also faces increased competition from cheaper imports which is
limiting their ability to win contracts or raise their selling prices.
     --Five of the eight sub-sectors expanded in July, down from seven in June.
Expansions were stronger in the larger sub-sectors of food and beverages,
petroleum, coal and chemicals, non-metallic minerals, and machinery and
equipment. A key support to the manufacturing industry comes from the ongoing
infrastructure projects.
     --The exports sub-index fell mildly into contraction in July, down 3.0
points to 49.9.  Exports remain supported mainly by food and beverages
sub-sector which indicates that many of the other sub-sectors are supported by
local demand.
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com
[TOPICS: MALDS$,M$A$$$,M$L$$$,MT$$$$]