Manufacturing continues to grow in May


The manufacturing sector continued to grow in May although at a slower pace than the previous month, according to Index

Manufacturing continues to grow in May
Manufacturing continues to grow in May
June 1, 2010

The manufacturing sector continued to grow in May although at a slower pace than the previous month, according to the latest Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI).

Results from last month reveal the Index fell 3.5 points to 56.3 (readings above 50 indicate an expansion in activity).

A slowing in growth in manufacturing production, new orders, inventories and supplier deliveries saw a fall in the number of sub-sectors expanding, from eleven in April, to seven in May.

However, growth in manufacturing employment and average wages strengthened over the month, with the sub-indexes rising to 58 and 55.6 respectively.

Ai Group Chief Executive Heather Ridout says the growth is a welcome sign of a recovery which has gained some traction.

"Unfortunately, the patchiness of the past several months also continues and there are worrying signs of weakness among the consumer-related sub-sectors of the industry," Ridout says.

"The sluggishness among the consumer-related sub-sectors reflects the cumulative impact of six rate rises out of seven RBA meetings and, to a lesser extent, an erosion of confidence against the background of falling global stock markets and high public debt levels in a number of European countries," she says.

PricewaterhouseCoopers Global Head of Industrial Manufacturing Graeme Billings maintains the continuing recovery in manufacturing is consistent with developments in the broader economy.

"Employment growth has continued to be strong and this should underwrite a continuation of the positive trend," Billings says.

Mirroring Ridout’s sentiments, he says there are factors which are inhibiting consumer demand, and admits this is showing up in the weakness among a number of manufacturing sub-sectors.

"Higher interest rates are playing their part in this and consumers seem to be holding back on their spending. The picture that emerges in the next couple of months will tell us a lot about the shape of the ongoing recovery."

KEY FINDINGS

According to the latest Australian PMI, the new orders sub-index fall 4.9 points in May but remained in positive territory (54.6).

Consumer-related sectors including food & beverages, clothing & footwear and textiles fell over the month as a result of higher borrowing rates and a reduction in disposable income.

Activity fell moderately in the fabricated metal products and machinery & equipment sectors, while in the miscellaneous manufactures sector, activity fell solidly following four months of growth.

Transport equipment was the highest performer for the month, with the sub-index lifting almost 10 points.

Solid growth was also experienced in the wood, wood products & furniture; chemicals, petroleum & coal products; paper, printing & publishing; basic metal products; and construction materials sectors.

Manufacturing exports rose for the third consecutive month, to settle at 57.6.


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