Australia's manufacturing sector weakened in May as new orders fell sharply for a third consecutive month amid rising costs and ongoing supply-chain disruptions linked to the war in the Middle East, according to a survey by S&P Global published Monday.
The headline seasonally adjusted S&P Global Australia Manufacturing Purchasing Manager's Index (PMI) fell to 50.7 in May from 51.3 in April, remaining above the 50-point mark separating contraction and expansion.
The headline PMI was lifted by sharply lengthening supplier delivery times, although underlying survey measures signaled a deterioration in business conditions midway through the second quarter.
New orders declined for a third consecutive month in May, as firms pointed to squeezed client budgets, elevated prices, and subdued demand, with export orders also falling amid weakness in Asian markets, marking the sharpest drop since October, per the report.
Manufacturing output fell for a fourth straight month in May amid weak demand, rising costs, Middle East uncertainty, and staffing shortages, while input, fuel, transport, and selling prices climbed sharply.
Input cost inflation eased slightly in May but remained elevated, while output price inflation accelerated to its fastest pace since August 2022 alongside worsening supply chain delays driven by higher fuel costs and Middle East shipping disruptions.
The firms reduced input buying and stocks in May amid weaker orders and output needs, while employment edged up for the first time in three months as hiring supported production and future projects.
Business confidence stayed subdued amid ongoing Middle East conflict and inflation-driven demand pressures, though a modest uptick in optimism in May reflected expectations of stronger new orders in the year ahead.