Australia's AIG Manufacturing PMI falls in May, 11th month of 'expansion'

Australia's AIG Manufacturing PMI for May came in at 51.0 vs 53.4, with the slide representing the 11th consecutive moth of 'expansion', and as AIG notes, making it the longest unbroken period of growth since September 2006.

Key points

The lift in the Australian dollar in early 2016 is likely contributing to some of this cooling in growth

Since the RBA rate cut in early May however, the Australian dollar has given up much of its early 2016 gains. This renewed depreciation may assist manufacturers to recover their export growth momentum in the coming months

Six of the seven manufacturing activity sub-indexes remained above 50 points in May ...the employment sub-index continued to contract (45.6 points) in May

Five of the eight manufacturing sub-sectors expanded in May (three month moving averages)  Comments from manufacturers in May indicate some wariness about the potential effects on their business from the upcoming Federal Election.

Margins remain tight and competition is aggressive, particularly from overseas businesses. The recent volatility in the Australian dollar is having some adverse effects and input prices continue to climb as a result. Defence spending appears to be lifting activity in some sectors, but drought conditions in some locations are dampening manufacturing activity elsewhere