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Australian PMI®: Manufacturing recovery slows in May 2019

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The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) remained in expansionary territory at 52.7 points in May 2019, down by 2.1 points from the previous month, indicating a slower rate of growth (readings above 50 points indicate expansion in activity, with the distance from 50 indicating the strength of the increase).

Ai Group Chief Executive Innes Willox said: “While Australia’s manufacturing sector continued to grow in May (2019), performance was mixed across the range of manufacturing industries and there are signs of further softening in the months ahead. Manufacturers are hoping that the resolution of political uncertainties associated with the election will provide a base for a return to more robust conditions. As one member put it in responding to the survey, ‘elections kill business’. The medium-term outlook remains clouded by the prospect of uncompetitive prices for gas, both for direct industrial use and as a critical input into electricity generation. Momentum eased for production, sales, exports and new orders with at best moderate growth recorded in these sub-indices. While the large food & beverages sector continued to grow strongly, as did the building, wood, furniture & other products category, the important metals products and machinery & equipment sectors slipped further. The chemicals sector lifted modestly and the businesses in the textiles, clothing, paper & printing sector recorded a slight reduction in performance,” Mr Willox said.

Australian PMI®: Key Findings for May 2019:

  • The Australian PMI® has been stable or positive (50 points or higher) since August 2016 (33 consecutive months).
  • Five of the seven activity indexes in the Australian PMI® indicated expanding conditions in May 2019, while two indicated broadly stable conditions. All indexes slowed compared to April 2019 except for employment (up 4.1 points to 55.6) and finished stocks (up 2.9 points to 50.8). The production index experienced its largest fall since October 2017 but remained in expansion (down 6.9 points to 51.2).
  • Three of the six manufacturing sectors expanded in May (trend), led by food & beverages (up 1.8 points to 63.9 – its fastest rate on record) and building materials, wood & furniture (up 3.8 points to 62.0). Both the metals products (down 0.3 points to 45.2) and machinery & equipment (down 0.9 points to 45.1) sectors contracted further in May 2019, weighed down by slowing economic conditions.
  • The input prices index rose again in May 2019 (up 3.6 points to 68.3) after falling in the previous two months, with elevated energy prices remaining the largest concern for many manufacturers.
  • The selling prices index eased by 2.8 points to 52.1, suggesting that prices for more manufactured goods went up but at a slower pace compared to April 2019.
  • The average wages index declined by 2.2 points to 55.5 in May 2019, indicating ongoing wage pressures across the manufacturing sector – but at its slowest rate since March 2017.

Background: The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) is a national composite index calculated from a weighted mix of the diffusion indices for production, new orders, deliveries, inventories and employment. An Australian PMI® reading above 50 points indicates that manufacturing activity is expanding; below 50, that it is declining. The distance from 50 indicates the strength of expansion or decline. Australian PMI® results are based on responses from a national sample of manufacturers that includes all states and all sub-sectors. The Australian PMI® uses the ANZSIC industry classifications for manufacturing sub-sectors and sub-sector weights derived from ABS industry output data. Seasonally adjusted and trend data are calculated according to ABS methodology. The Australian PMI® commenced in 1992. More information about the history and methodology of the Australian PMI® is available online.

Source: Ai Group

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