Ai Group Australian PMI for May indicates expansion in sector

Ai Group

The Australian Industry Group (Ai Group), peak employer organisation, has shown a 0.1-point increase for May in its Australian Performance of Manufacturing Index (Australian PMI), amounting to 61.8 points. 

This denotes a faster rate of expansion in activity. In its eighth month of consecutive recovery following Q2 of 2020, the result represents the index’s highest monthly result since March 2018 and the fourth highest since the Australian PMI commenced in 1992.  

“Australia’s manufacturing sector maintained its rapid pace of expansion in May, fuelled by strong demand from the construction sector, a pick-up in business investment and healthy demand from households,” Ai Group chief executive Innes Willox said. 

“Each of the six diverse manufacturing groups expanded at a more rapid rate in the month led by the machinery and equipment, building products and chemicals sectors. Manufacturing production and employment accelerated and while the pace of expansion eased from April’s record high, sales also continued to rise. 

“Manufacturers experienced further pressure on input costs and with wages also rising more rapidly, they are seeking to recover some of these extra costs from customers. With capacity utilisation running at high levels and new orders continuing to grow, manufacturers are finding it increasingly difficult to fill positions. While the new Victorian lockdown will dampen enthusiasm somewhat, these conditions are likely to be setting the stage for a lift in investment by manufacturers,” he said. 

 

Seasonally adjusted  Index this month  Change from last month  Long-run average  Trend  Index this month  Change from last month  Long-run average 
Australian PMI  61.8  0.1  50.7  Food & beverages  61.0  1.0  53.8 
Production  64.5  0.9  51.5  Machinery & Equipment  64.7  0.2  50.1 
Employment  61.3  3.3  49.1  Metals products  54.5  0.8  47.3 
New Orders  64.9  1.5  51.3  Petroleum, coal, chemicals & rubber products  65.7  2.1  51.6 
Supplier Deliveries  51.6  -7.5  51.0  Building, wood, furniture & other  66.4  3.8  49.9 
Finished Stocks  62.3  -0.7  49.7  Textiles, clothing, footwear, paper & printing  64.2  0.4  46.9 
Exports  48.9  -9.9  50.0         
Sales  60.9  -4.2  49.4         
Input prices  82.1  8.0  67.6         
Selling prices  58.3  5.4  48.4         
Average wages  62.9  1.1  58.7         
Capacity utilisation (%)  85.1  0.0  74.1         

Results above 50 points indicate expansion. * All indexes for sectors in the Australian PMI are reported in trend terms (Henderson 13-month filter). 

 

All six manufacturing sectors in the Australian PMI expanded in May at a faster pace than April. Sectors that directly supply the construction sector saw the strongest results, including building materials (up 3.8 points to 66.4), machinery & equipment (up 0.2 points to 64.7) and chemicals (up 2.1 points to 65.7). 

Six of the seven activity indices expanded in May, with only the exports index indicating a contraction (down 9.9 points to 48.9). Those with stronger expansion were production (up 0.9 points to 64.5), employment (up 3.3 points to 61.3) and new orders (up 1.5 points to 64.9). 

Meanwhile, input prices for manufacturers are surging for various raw materials due to high global commodity prices for metals, oil and other key inputs. This pushed index prices up 8.0 points to 82.1, its highest level since June 2008. Manufacturers’ selling prices also increased (up 5.4 points to 58.3), suggesting more manufacturers are passing on some of these higher input costs to their customers. 

The average wages index rose again in May (up 1.1 points to 62.9), while the capacity utilisation index maintained April’s record high at 85.1 per cent. 

To view the full Ai Group Australian PMI, click here.

Leave a Reply