The manufacturing sector has opened the year in positive territory with a modest rise in activity across most sectors.
The Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) rose 2.5 points to 51.0 in January (readings above 50.0 indicate a rise in activity).
Manufacturing activity expanded in the month on the back of a lift in new orders and exports.
The sector saw renewed demand in the housing and resources sectors, particularly for companies involved in construction materials, transport equipment and petroleum and coal products.
Overall activity expanded despite the first contraction in employment in three months.
Ai Group chief executive, Heather Ridout, said: "While manufacturing made a relatively encouraging start to the year, the performance of key components remained patchy, with a rise in new orders broadly offset by a heavy run down in stocks and a decline in employment.
"With output in the sector having fallen by 7.8 per cent in the year to the September quarter 2009, and with around 80,000 jobs lost from the sector in 2009, a sustained upswing in manufacturing activity is needed to fill the large chunk taken out of the sector by the global economic downturn," Ms Ridout said.
PricewaterhouseCoopers Global Head of Industrial Manufacturing, Graeme Billings, said: "Despite the continued improvement in the broader economy, manufacturers are finding revenue growth to be a major challenge.
“In January profit margins were squeezed further by a decline in selling prices and a slight acceleration in input costs and wages growth.
“In recent months, the rate of capacity utilisation in the manufacturing sector has lifted to be more or less in line with the long-run average, and it is therefore vital that manufacturers seek new ways in which to boost their levels of productivity."