After the largest single-month drop in the index’s history in April, the Australian Industry Group Australian Performance of Manufacturing Index recovered by 5.8 points to 41.6 in May.

COVID-19 restrictions continue to affect demand across the board, but that decline slowed across all activity indices in May. The exception was the exports index, which recorded its lowest ever monthly result as many overseas markets shut down.

The manufacturing industry remained in deep contraction throughout the month. Many manufacturers reported that orders from their regular customers have been delayed or cancelled altogether due to the pandemic.

“While less of a fall than we saw in April, the further deterioration of manufacturing performance in May is deeply concerning,” says Ai Group chief executive Innes Willox.

The large food and beverages group enjoyed a small gain, and chemicals remained steady, but all other sectors of manufacturing went further backwards in May.

Manufacturing production and employment fell from an already low base, while new orders dropped further.

Willox says the industry is hoping the fiscal and monetary support that has been provided to the economy, together with the gradual lifting of restrictions that are inhibiting production and consumption alike, limit the extent of further deterioration and hasten the beginnings of a recovery.

“In the meantime, we are steadying ourselves for further losses as indicated by the low level of new orders received by manufacturing businesses. Action to accelerate the easing of restrictions is particularly important given the success in constraining the spread of COVID-19,” he says.

“The removal of interstate barriers to the movement of goods and people is clearly overdue.”