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Outlook Remains Bullish


Monthly activity data falls less than expected


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Repeats Story Initially Transmitted at 23:36 GMT Aug 31/19:36 EST Aug 31
--Manufacturing Expands for 11 Straight Months
     SYDNEY (MNI) -  - From Australia Industry Group's Performance of
Manufacturing Index for August published Friday:
                          August  Change from July
Australian PMI              59.8              +3.8
Production                  61.4              +2.4
New Orders                  64.3              +8.5
Employment                  56.4              -1.0
Inventories                 58.9              +9.9
Supplier Deliveries         52.9              -1.1
Average Wages               59.0              +3.3
Input Prices                62.9              -6.4
Selling Prices              53.7              +3.7
Exports                     49.3              -4.6
Sales                       50.9              -4.9
Capacity Utilization (%)    77.0              +0.7
     FACTORS: The manufacturing index rose further in August to reach the
highest level since 2002, and marking 11 straight months of expansion -- the
longest run since 2007. Six out of seven activity sub-indexes expanded with
exports the only one in contraction, albeit a mild one, likely reflecting a
stronger exchange rate. New orders rose to the highest level since May 2002 and
production continued its strong run of expansion in response to rising forward
orders and stockpiling which was also reflected in a 9.9-point jump in stocks
sub-index. Input prices fell but remained at elevated levels but wages rose and
selling prices also rose. A bright spot was some manufacturers commenting that
their ability to raise selling prices to match rising costs was improving.
Still, pressure on their margins remained, with rising energy costs adding to
this issue. Among sub-sectors, food, beverages and tobacco continued its long
run of expansion but respondents noted the higher Australian dollar has been
curbing their rate of growth. The non-metallic mineral products sub-sector which
is mainly building materials, rose 3.5 points to record high 72.3 due mainly to
pick-up in non-residential building activity which offset some easing in
residential construction. 
     TAKEAWAY: The gains in the manufacturing industry are occurring despite an
elevated exchange rate, which is a very positive development. The industry is
getting support from non-residential and infrastructure construction, and
renewed activity in the mining sector as metals prices recover. The survey
vindicates the optimism shown by Reserve Bank of Australia in forecasting
continued growth for the economy despite the elevated Australian dollar, though
it remains concerned that further rise could hurt growth and employment
     COMMENTS: AI Group Chief Executive Innes Willox said the alignment of the
stars continued for domestic manufacturing with index indicating a very strong
performance in August.
     But "alongside the weight of good news, the recent lift in the value of the
Australian dollar is dampening the outlook for sales growth both in export and
the domestic markets. As well, energy prices and the uncertainty around energy
policy are inhibiting investment and causing grave concern particularly among
the more energy-intensive segments of the industry," he said.
--MNI Sydney Bureau; tel: +61 2-9716-5467; email:

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