The Australian Industry Group PricewaterhouseCoopers' performance on manufacturing index has reportedly posted its highest climb of 59.8 points in eight years amidst the busiest period so far seen in the manufacturing sector and coupled with strong turnovers from the building and infrastructure industries.

The AAP has reported that the latest survey showed the country's highest Private Mortgage Insurance (PMI) readings since May 2002, where index points beyond 50 are indicative of economic expansion, as AI Group chief executive Heather Ridout is upbeat that the manufacturing industry is heading to considerable recovery stage.

She said that the April PMI reflected an Australian sector regaining some lost grounds while the economy is expanding, notwithstanding that manufacturers are still facing high dollar rates, normalised interest rates and the disappearing fiscal stimulus.

Ms Ridout added that the export sector is experiencing a modest growth amidst the presence of competitive pressures and a strong Australian dollar, as she warned that the sector could still be affected by higher cost of financing and sudden fluctuation of demands as brought about by rising interest rates.

The report revealed that seen improvements in building and infrastructure markets resulted to marked growths in 11 of the 12 sectors surveyed, as the clothing and footwear companies suffered declines for four consecutive months.

Ms Ridout said that companies can still afford to relax at this time while the local economy is in the midst mustering strength, as she stressed that the manufacturing sector "faces fundamental challenges from emerging skills shortages and the commodity-fuelled (relative interest rate differential expectations are more important at the moment) currency."

She said that the country must take advantage in addressing its economic issues as the federal budget gets underway, stressing that its introduction "presents an opportunity to address these challenges with active policy in the area of education and skills development, a resumption of pre-crisis levels of skilled immigration and far-sighted investments in innovation, research and development, business capabilities and export market development."

PricewaterhouseCoopers global head of industrial manufacturing Graeme Billings welcomed the rising demand for manufacturers as shown in the April PMI, yet he warned that profitability is still under pressure as input cost growth remains shooting up for the past few months.

To stay healthy and competitive, he advised that "manufacturers will need to sustain a strong focus on cost management over coming quarters particularly in the face of rising skills shortages."