Australian industry marks one year of contraction: Ai Group

The Australian Industry Group (Ai Group) has reported that its Australian Industry Index fell in April 2023, dropping 14.0 points to -20.1 points (seasonally adjusted). This indicates contractionary conditions. The index has been in contraction for the last 12 months.

The report shows that Australian industry sank deeper into contraction in April on the back of falling demand and activity. Industrial activity and sales sunk deeply into contraction while the fall in new orders, which began in March, continued. All industrial subsectors are in contraction following declines in April. Manufacturing, chemicals, food and beverage and business services reported steep falls.

Capacity utilisation grew marginally to 81.2%, reflecting ongoing labour and supply chain shortages, while upwards pressures on prices continued to be strong despite inflation having peaked.

“Australian industry marks a disappointing anniversary in April — 12 months of continuous contraction,” said Innes Willox, Chief Executive of Ai Group. “Activity and sales have fallen into contraction as demand is weakening, a pattern now affecting every subsector within industry. Yet price pressures and shortages for supply chains and labour remain acute, trapping industry between supply constraints and falling demand.

“The decision by the Reserve Bank to raise interest rates, while necessary to contain inflation, will add more pain to businesses facing a worsening economic outlook.”

The Ai Group Australian Industry Index is a monthly index that measures changes in activity in Australia’s industrial sectors. It provides diffusion indices that measure rates of changes in the level of industrial activity — expansion, stability or contraction. A positive reading indicates the activity is expanding; negative indicates contraction. The distance from 0 indicates the strength of the expansion or decline.

The full report can be accessed here.

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