SYDNEY, Feb 1 (Reuters) - Australian manufacturers enjoyed another month of solid expansion in January with demand, both domestically and from offshore, strong enough to allow firms to raise prices to protect profit margins, a survey showed on Thursday.
The CBA-Markit Purchasing Managers Index (PMI) of activity dipped to 55.4 in January, from a historically high 57.1 the month before, but remained well above the 50 boundary that separates growth from contraction.
"The Australian manufacturing sector has started 2018 on a healthy note," said CBA chief economist Michael Blythe.
"Readings for current and future conditions remain strong. New orders from both domestic and offshore sources, for example, are expanding."
Business optimism also strengthened to a six-month high, with firms reporting higher capital expenditure and new opportunities in overseas markets.
The survey's employment measure remained relatively buoyant at 54.1 as firms hired to sustained increasing output. Payroll numbers have expanded in each month since September 2016.
Firms also reported an increase in delayed deliveries by suppliers and a growing backlog of work, while output prices rose at the fastest pace since August.
"Input costs are filtering through the pricing chain," said Blythe. "It seems that demand is strong enough to allow manufacturers to protect margins by lifting output prices".