Manufacturing remains in deep contraction in May, according to report

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The Australian PMI recovered marginally in May but remained in deep contraction in as COVID-19 restrictions affected demand across the board. 

According to Ai Group’s latest report, the Australian PMI recovered by 5.8 points to 41.6 in May, after experiencing the largest single-month drop since the Global Financial Crisis in April.

Ai Group Chief Executive Innes Willox said that even though  the decline slowed across all activity indices in May – except for the exports index which recorded its lowest ever monthly result – the further deterioration of manufacturing performance in May was ‘deeply concerning’.

“From an already low base, manufacturing production and employment fell, and new orders dropped further,” Mr Willox added.


“Other than the large food & beverages group which experienced a small gain, and the chemicals group which was broadly steady, all sectors of the manufacturing industry went further backwards in May.

According to the report, manufactured exports suffered a particularly severe hit as many overseas markets essentially shut down because of the COVID-19 pandemic.

Mr Willox said many manufacturers reported that orders from their regular customers have been delayed or cancelled altogether because of the pandemic.

“The industry is hoping the fiscal and monetary support that has been provided to the economy, together with the gradual lifting of restrictions that are inhibiting production and consumption alike, limit the extent of further deterioration and hasten the beginnings of a recovery,” he continued.

“In the meantime, we are steadying ourselves for further losses as indicated by the low level of new orders received by manufacturing businesses.

“Action to accelerate the easing of restrictions is particularly important given the success in constraining the spread of COVID-19. The removal of interstate barriers to the movement of goods and people is clearly overdue,” Mr Willox concluded.

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