Judo Bank / S&P Global Australia final manufacturing PMI for May 2023 improves to 48.4 but remains in contraction
- preliminary and prior were both 48.0
- Australian preliminary PMIs: Manufacturing 48.0 (prior 48.0) Services 51.8 (prior 53.7)
From the report:
- Even though the May PMI is up slightly from April, the underlying trend is consistent with a gradual slowdown in activity across the manufacturing sector.
- slowdown in manufacturing sector activity in Australia is consistent with a cyclical slowdown in global manufacturing activity, as well as weaker demand for consumer goods in the domestic market and challenging conditions in the construction sector
- New orders rose in May although this series remains below 50 in contractionary territory. This suggests that the sector is experiencing a normal cyclical slowdown with few signs of a more severe downturn typical of a recession in the broader economy
- Input prices increased in May but are well below the elevated levels we have seen over the past three years. The manufacturing sector is no longer a source of significant inflationary pressure within the Australian economy, however, we are far from seeing deflation in manufactured goods
- Supply chains have normalised in 2023 and continue to be operating in an orderly fashion ... the slowdown in manufacturing activity over the past year has seen capacity restored. Suppliers’ delivery times are now easing at the fastest rate in a decade while the backlog of work is at the lowest level since the initial pandemic lockdowns in 2020
- The employment index is falling and is now only just in expansionary territory, the lowest since late 2020. The cyclical slowdown in manufacturing activity, coupled with a big reduction in the backlog of work over the past six months, appear to be reducing the demand for labour
- These developments in the manufacturing sector will likely be welcomed by policymakers, particularly the RBA. The economic policy priority is to get inflation back down to the RBA’s 2% to 3% target, which will require a slowdown in economic activity. This is precisely what we are seeing in the manufacturing sector in 2023. The recent pick-up in service sector activity could be problematic for the RBA.
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Tha PMI of most focus during the session here today is the one from China:
Yesterday's official manufacturing PMI from China slumped further into contraction: