Supply chain pressures continue to ease

The Ai Group Australian Industry Index® increased by 3.1 points to -11.6 points in August (seasonally adjusted), indicating contractionary conditions. The index has been negative for the past 16 months.

Key findings for August 2023:

• The Ai Group Australian Industry Index® indicated contractionary conditions in August, for the 16th month since the start of the current interest rate rising cycle.
• The employment, industrial activity and new orders indicators all continued to indicate contractionary conditions.
• All Aii industries – manufacturing, construction, business services and subindustries – reported contraction as well.
• Input prices eased, while input volumes grew into expansionary levels not seen since mid-2021. This suggests supply chain pressures are continuing to ease.
• Price indexes all fell in August, reflective of lower but still persistent inflation. The sales price indicator fell to its lowest reading since the height of the pandemic in mid-2020.

Innes Willox, Chief Executive of the national employer association Ai Group said: "There is positive supply chain news in August, with the input price indicator starting to fall while input volumes turned positive for the first time since the pandemic. Supply chain pressures have been easing throughout 2023, and these positive developments suggest we are getting close to a return to normal. Improved supply arrangements also show up in the welcome further easing of price pressures. While these are positive signs, we are far from being out of the woods: businesses from across a wide range of industries are reporting falling activity, employment and new orders as they brace for the further impacts of higher interest rates on consumers and businesses," 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. See detailed methodology.

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