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Australia final May manufacturing PMI 48.4 (prior 48.0) | Forexlive

Judo Bank / S&P Global Australia final manufacturing PMI for May 2023 improves to 48.4 but remains in contraction

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.

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: