The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) jumped by 3.8 points to 59.8 in August – an 11th consecutive month of expansion for the manufacturing sector and the highest monthly result for the Australian PMI since 2002.

Six of the seven activity sub-indexes in the Australian PMI expanded in August with production (up 2.4 points to 61.4) and new orders (up 8.5 points to 64.3) especially strong (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase). Robust expansion in inventories (up 9.9 points to 58.9) rather than sales (down 4.9 points to 50.9) suggests current activity is geared towards future orders and stockpiling rather than for immediate delivery.

Seven of the eight manufacturing sub-sectors expanded in August (acording to trend data based on the Henderson 13-month filter), led by non-metallic mineral products (up 3.5 points to 72.3 – its highest monthly level since this sub-series commenced in 2009) and wood & paper products (up 1.7 points to 71.1). These results reflected local demand from the building industry and from food manufacturing and processing (for packaged products).

“The alignment of the stars continued for domestic manufacturing with the Ai Group Australian PMI indicating a very strong performance in August,” said Ai Group Chief Executive Innes Willox. “Production and employment lifted and new orders grew strongly in a month of broad-based expansion across the sector. A particularly strong showing by the non-metallic mineral products sub-sector reflects its close links with the building and construction industry buoyed by investment in infrastructure, a lift in commercial building and solid levels of activity in residential building.”

The input prices sub-index fell 6.4 points to 62.9 but remains elevated, with energy costs of great concern to manufacturers. The recent lift in the dollar dampened imported input prices but also affected export sales. Exports paused this month (49.3 points) after growing well for the past year. The selling prices sub-index increased by 2.9 points to 53.7 in August, with some manufacturers commenting that their ability to raise selling prices to cover some of their rising input costs is improving.

“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,” Willox added. “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.”