Survey shows manufacturing index has hit seven-month high

Manufacturing in Australia has climbed to its highest point in seven months, indicating the pace of decline in the sector is easing, a survey found.

The Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index (PMI) rose by 7.4 points to 37.5 points in the month of May, seasonally adjusted.

An index reading above 50 points indicates that manufacturing is generally expanding, while below 50 means it is declining. While still below 50, the index is at a seven-month high Australian Industry Group chief executive Heather Ridout said in a statement on Monday.

"The lift in the Australian PMI in May brings it into much closer alignment with the direction and strength of global PMIs," she said in a statement. "The slowing of falls in new orders and production across the sector in this month's data may indicate that stimulatory fiscal and monetary policy is having a stabilising effect."

However, uncertainty is pervasive in the industry and confidence remains very fragile, according to Ridout. Firms cited weak orders and sales as their key concern, with some pointing to weak demand from resources, construction and retail sectors.

PricewaterhouseCoopers spokesman Graeme Billings said manufacturers are feeling the full effect of deteriorating markets on demand for their products and their prices.

"Lower prices and demand are putting additional pressure on margins and, though this month’s data suggests that input costs are stabilising, more needs to be done to reduce unit costs if profitability is not to slide further," he said.

"Business plan reviews, a focus on cost reduction and the ongoing search for efficiency are critical strategies as the current downturn works itself through the sector."

Source: AAP NewsWire