Australia's manufacturing sector grew for the second consecutive month during September, pushing to its highest level since December 2007, a performance gauge produced by an industry group shows.
The manufacturing sector's return to health is yet more evidence Australia's economic downturn has been much shallower than expected and bodes well for unemployment to peak below government forecasts.
Increases in production, inventories and supplier deliveries helped the Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index gain a modest 0.3 point in September from August to 52.0. A reading above 50 separates growth from contraction.Chemicals, petrol and coal products along with printing and publishing enjoyed the strongest gains, with tepid increases across food, metal products and transport equipment.
Job losses slowed substantially in the month after 20 consecutive monthly falls in manufacturing employment, with the employment index rising 9.2 points to 49.7.
Heather Ridout, chief executive of Ai Group, warned that factories still face pressures from a surging Australian dollar, which she said negates the case for the Reserve Bank of Australia to tighten policy.
"The very steep rise in the exchange rate is equivalent in key respects to a monetary tightening. This further strengthens the case to leave interest rates at current levels," Ridout said.
In particular, Ridout highlighted September's new orders subindex eased by 9.3 points to 51.0, having grown during August.