Australian Industry Group Performance of Manufacturing Index for May

A big drop on the month, down 4.4 points to 54.8 for its 8th consecutive month in expansion

  • prior 59.2 (was the strongest monthly result since February (before that since May 2002))

AiG's key points from the report (bolding mine):

  • All seven activity sub-indexes expanded in May albeit at a slower pace than in April. New orders remained elevated (58.1 points), suggesting the current expansion has some way to run. Employment (54.2 points), deliveries (55.8 points) and sales (54.4 points) remained relatively strong. Exports (52.0 points) slowed but remained expansionary, as did production (52.2 points) and stocks (50.9 points).
  • Seven out of eight sub-sectors expanded in May, the same as in April (trend data). Expansions continued across all sub-sectors except textiles, clothing and other manufacturing (39.4 points). The recovery in wood & paper products strengthened (65.3 points) as did printing & recorded media (62.5 points), petroleum, coal & chemical products (56.7 points) and metal products (60.9 points). Other sub-sectors kept expanding but at a slower pace, including food & beverages (56.8 points), non-metallic mineral products (62.1 points) and machinery & equipment (58.9 points).
  • Manufacturers reported slower conditions than previous months, although demand is still relatively elevated. Exports are a key source of growth with many manufacturers strongly focussed on export markets. Less positively, others are feeling the impacts of the exiting auto industry more acutely. Strong overseas competition remains evident and the Federal Budget has caused some unease. Slower retail conditions are also having some negative impacts for manufacturers, while slow capital expenditure by business is limiting demand for others. Elevated input costs are an ongoing challenge, particularly for raw materials and energy costs. Specialised labour shortages are posing challenges for some manufacturers.

An upbeat report but AiG is not ignoring the difficulties, bolded in that final point. As an aside, AiG is a lobby group for Australian business, so they do have a tendency to highlight difficulties. They are not a 'everything is fine' organisation.