Manufacturing still expanding in February

Australia's manufacturing sector has continued to expand in February but at a slower pace than it did in January.

Australia's manufacturing sector continues to expand, though at a slower pace.

The Australian Industry Group's Australian Performance of Manufacturing Index (PMI) slid 1.2 points to 57.2 points in February, above the 50-point level that indicates expansion rather than contraction.

Ai Group chief executive Innes Willox said all seven measures of activity in the manufacturing sector expanded in February, the fourth consecutive month in which all have seen growth.

"Production, employment and exports were all encouragingly strong and the further growth in new orders points to the likelihood that the sector will extend its 17-month unbroken run into autumn," Mr Willox said.

"That said, for some producers, skill-shortages are re-emerging as a constraint on growth and are putting pressure on remuneration among a range of highly-skilled occupations."

Wage growth in Australia remains at historically weak levels, and Ai Group's measure of wages in the manufacturing sector has fallen to its lowest point since July.

Its measure of employment posted a strong increase, as some manufacturers found the confidence to start hiring after a period of sustained growth in industry activity.

Some respondents to the survey also reported an increasing dependence on overtime to cover higher than usual activity.

With electricity input prices for manufacturers sitting at twice what was being paid a decade ago, many manufacturers are also reporting that energy costs are whittling away at their margins.

The strongest contributor to the manufacturing industry's growth was the giant petroleum, coal, chemicals and rubber products sector.