Manufacturing recovery slows in May

manufacturing

The Australian Industry Group Australian Performance of Manufacturing Index fell by 6.1 points to 52.4 in May.

The result indicating a weaker pace of expansion and halting three months of consistent acceleration (readings above 50 points indicate expansion in activity, with higher results indicating a faster rate of expansion).

Innes Willox, Chief Executive of Ai Group the national employer association said manufacturers continue to report supply constraints and labour shortages as the leading sources of concern.

“They reported still higher input costs and a lift in wages growth in May,” he said. “There are mixed messages about the immediate outlook with new orders continuing to rise but with many manufacturers expressing concern about the prospects of sharp energy price rises in the months ahead. Overall, the pace of growth in the manufacturing sector eased in May fuelled by falls in exports and domestic sales.”

“Employment returned to growth and production was up on the previous month although the pace of output growth eased. Sector-wide performance was led by an acceleration of growth in the metal products group with chemicals and machinery and equipment producers continuing to expand although at slower rates. Building materials producers reported flat conditions while the large food and beverage group eased back into a mild contraction.”

Australian PMI: Key Findings for May 2022

  • Manufacturing post-COVID recovery slowed down in May. While most subsectors remain in an expansionary phase, rates are lower than in recent months.
  • Most manufacturing activity indicators including production, employment and new orders remained expansionary, while sales, exports and supplier deliveries fell into contraction.
  • Labour challenges and supply chain disruptions remain the major structural constraints on manufacturing. Input prices and wages both rose further, to mark the highest readings in the Australian PMI series.

In May, Federal election uncertainty, poor weather and labour market issues hampered manufacturing recovery. Demand from the agriculture and resource sectors contributed to stability.