The manufacturing industry continued to struggle last month, which analysts believe is the result of measures announced in the federal budget.
Chief Executive of the Australian Industry Group Innes Willox said the impact of the federal budget is weighing heavily on consumer and business sentiment at the moment - and manufacturers are not immune.
The Australian Industry Group Australian Performance of Manufacturing Index for May registered a mild increase of 4.4 points to reach 49.2. A reading of 50 usually marks the point of expansion.
New order and manufacturing production increased during the month, with these sub-indexes seeing their index readings improve to 51.6 points and 55.1 points, respectively.
However, these increases were not substantial enough to counteract the declines in employment, supplier deliveries, exports and inventories witnessed during the month.
Mr Willox commented: "The manufacturing sector continues to be buffeted by weak household demand, a lack of business confidence and fierce competition in both domestic and export markets heightened by the renewed strength in the Australian dollar."
Further results show four sub-sectors expanded out of the eight taken into consideration. The relatively small wood and paper products industry recorded the highest reading of 55.5.
Meanwhile, the printing and recorded media sub-sector posted the weakest result of 37.3 points in May.
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