The Australian Industry Group Performance of Manufacturing Index recorded a score of 43.8 for May, an improvement on the previous month but continuing the industry’s contraction for the 23rd straight month.
The PMI is a seasonally-adjusted national composite index based on survey results from more than 200 companies. A score of 50 is the line separating contraction and expansion.
The May PMI saw no sub-sectors and no states record growth.
"The Australian PMI recovered somewhat in May from the plunge in April, but the overall landscape across manufacturing is still one of contraction,” said Ai Group CEO Innes Willox in a statement.
“The welcome drop in the Australian dollar in recent weeks will provide breathing space for many exporters and will help lift confidence. However, the dollar remains well above its post-float average and there will need to be sustained falls if we are to see a real impact on import-competing manufacturers and exporters.”
In a month that saw numerous media stories focus on the difficulties faced by manufacturers following Ford’s announcement that it would stop making cars in Australia in 2016, exchange rates declined but remained well above long-term trends.
Bright spots included an improvement on April’s score of 36.7 and increases in the new orders (42.3) and production up 9.9 points to 42.3) sub-indices.
“Manufacturers are telling us that despite the latest cut to official interest rates, weak demand from businesses and consumers remains all too evident,” said Willox.
This caution is to a degree being influenced by the prelude to the federal election which is generally a period when consumers and business keep their hands in the pockets.”