AUSTRALIAN MANUFACTURING INDEX UP IN MAY: SURVEY.

SYDNEY, June 1 Asia Pulse - Treasurer Peter Costello's Budget and a falling jobless rate gave the Australian manufacturing industry a boost in May, a survey shows.

The Australian Industry (Ai) Group/PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI) rose 3.5 index points to 55.2 in May.

Ai Group chief executive Heather Ridout said the strengthening in manufacturing activity was a further sign the economy was continuing to grow at a good pace in the first half of 2007.

"The resurgence in economic growth that was evident late last year appears to have broadened in recent months, underpinned by fading fears of an early interest rate rise, further falls in the unemployment rate and the measures announced in the federal budget," she said.

"While stronger activity and rising fuel costs have brought some increased risk of inflation, the continuing strength of the Australian dollar and uncertainty over the extent of the US slowdown should allow the Reserve Bank to leave interest rates on hold for some time yet."

PricewaterhouseCoopers global leader of industrial manufacturing, Graeme Billings, said to fully exploit the stronger conditions, Australian manufacturers must remain alert to the potential for international competitors to continue making inroads into domestic markets.

"This means not just becoming leaner and reducing costs, but working with customers to meet their needs on quality, innovation and reliability.