Manufacturers report pandemic-era lows

The Ai Group Australian Industry Index® fell in July 2023, losing 2.8 points to -14.7 points (seasonally adjusted). This indicates contractionary conditions. The index has been negative for the last fifteen months.

Key findings for July 2023:

• The Ai Group Australian Industry Index ® indicated contracting conditions in July, for the fifteenth month since the start of the current interest rate rising cycle.
• The Australian PMI® indicator fell to -25.6, indicating contractionary conditions in manufacturing not seen since the height of the pandemic.
• The employment, industrial activity and new orders indicators all weakened into broader contraction.
• Price indexes all rose mildly in July, reflective of lower but still persistent inflation. The average wages indicator surged by 14.0 points to its highest level, indicating ongoing wage pressures in the tight labour market.
• Capacity utilisation fell marginally to 79.0%, reflecting slowing industrial conditions.

Innes Willox, Chief Executive of the national employer association Ai Group said: "Australia's economic slowdown has squarely hit industry. The Ai Group Australian PMI® in July reveals manufacturers reporting pandemic-era conditions, while construction continues to struggle with structural problems. Indicators of sales, employment and new orders are all falling, while reported cost pressures continue to rise despite inflation having peaked. Of particular concern are wages, which are rising at a record pace while industry faces the threat of contractionary conditions. Changes to industrial relations laws will add unnecessary pressure to our already struggling industrial sectors," Mr Willox said.

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About the Ai Group Australian Industry Index®
The Ai Group Australian Industry Index® is a monthly index that measures changes in activity in Australia’s industrial sectors. It provides diffusion indices which 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 Australian Industry Index is based on monthly surveys from a national sample of Australian businesses. It uses ANZSIC industry codes for classifying sectors, and weights survey results using ABS data on gross value added by sector. Seasonal adjustment and trend calculations follow ABS methodology. For the detailed methodology, please visit https://www.aigroup.com.au/resourcecentre/research-economics/australian-industry-index/FAQs/

When referring to the Ai Group Australian Industry Index® the source should be attributed as “Australian Industry Group”.