Australia’s manufacturing sector expanded for a fifth consecutive month in May, though at a slower pace, with the PMI easing to 51.0 from 51.7 in April, according to S&P Global.
While this marked the fifth consecutive month the index stayed above the neutral 50.0 threshold – indicating improving business conditions – the latest figure was the lowest since February, signalling a softening in the rate of expansion.
“May’s Australia Manufacturing PMI data revealed that the goods producing sector continued to expand,” said Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence.
“Despite a moderation in the pace of growth, anecdotal evidence suggested that the slower rate of expansion, including a slight reduction in output, was partially driven by the election and may therefore prove temporary.”
New orders rose in May, helped by a return to growth in export demand for the first time in three months. However, the pace of overall new business growth slowed to a three-month low, with some manufacturers pointing to uncertainty surrounding the federal election as a contributing factor.
Manufacturing output, in turn, declined slightly – only the second contraction recorded this year.
The reduced output weighed on purchasing activity, which fell in May. As a result, stocks of purchases were modestly depleted, with supply and shipping issues contributing to longer delivery times. The deterioration in vendor performance was reported to be the sharpest so far this year.
Pan noted that forward-looking indicators remain positive. “Indeed, forward-looking indicators provided signs that output may increase in the coming months with renewed export order growth, and the first recorded lift to business confidence since February,” she said.
Despite the fall in production, Australian manufacturers continued to expand their workforce. Employment rose for the third straight month as firms backfilled roles and hired additional staff to support operations. This contributed to the fastest clearance of outstanding work since November last year.
Business confidence also improved for the first time in three months. Manufacturers reported optimism for higher sales ahead, supported by business development plans and expectations of more stable economic and trade conditions.
Cost pressures remained, with average input prices rising in May due to increased raw material and transport costs. However, the pace of inflation eased to a six-month low, offering some relief to manufacturers.
