The manufacturing sector continued to grow in May, but at a slower pace than the previous month.
latest Australian Industry Group PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI) fell 3.5 points in May 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. Growth in manufacturing employment and wages strengthened in the month and manufacturing exports rose for the third consecutive month.
Australian Industry Group Chief Executive, Heather Ridout, said: "The continuing growth in manufacturing in May is a welcome sign of a recovery that has achieved 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.
"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," Ms Ridout said.
PricewaterhouseCoopers Global Head of Industrial Manufacturing, Graeme Billings, said: "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.
"There are, however, clearly some factors that are inhibiting consumer demand in particular and 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," Mr Billings said.