Oz manufacturing - heartbeat detected

After two years of declines, Australian manufacturing has begun a recovery, kicked to life by low interest rates and a weaker dollar

The manufacturing sector "nudged growth" in June, according to the latest monthly survey of the sector by the Australian Industry Group.

The key measure from the survey, the Australian Performance of Manufacturing Index (PMI), rose to 49.6, up 5.8 points from May.

That result put the PMI just under the 50-mark that stands between contraction and expansion.

The last over-50 reading from the PMI was in June 2011.

The rise in the index was mainly the result of a marginal pickup in production.

New orders and supplier deliveries, which both go into the calculation of the PMI, were still contracting, but at only a fraction of the rate seen in May.

Employment in the sector continued to contract, according to the survey, as it has done every month since a minor increase in October 2011.

Ai Group Chief Executive Innes Willox described the improvement in the PMI as unexpected.

"The Reserve Bank's reductions in the cash rate appear to be supporting a weak pickup in local demand and the drop in the exchange rate may be assisting domestic producers in the local market.

"Export conditions, however, remain extremely challenging," he said.

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