AUSTRALIAN INDUSTRY INDEX

Global risks loom large for manufacturing

Key findings

The Australian Industry Index® eased by 5.1 points to -15.0 seasonally adjusted in April.
Global trade settings, currency volatility, and the federal election all weighed on industrials in April. Short-run indicators improved slightly but forward indicators remain very weak.
Uncertainty arising from US tariffs is having differential effects on industry. Construction and services are showing improvement, but trade-exposed manufacturing industries continue to weaken.
The metals and machinery subindustries are showing particular weakness, with uncertainty surrounding tariffs and currency weighing on current performance and future outlook.

The contractionary conditions in the Ai Group Australian Industry Index^®continued but eased in April, lifting 5.1 points to -15.0 points (seasonally adjusted). The index has indicated contraction for the last thirty-four months.

April 2025

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Industry activity

The contraction in the activity/sales indicator eased in April, lifting by 7.1 points to -18.3. In trend terms the index has improved from the recent trough in mid-2024.
Employment deteriorated further in April, falling 5.8 points to -18.2 points. Industrial employment has been contracting since mid-2024.
Respondents noted a slowdown in activity leading up to the election, and ongoing cost of living pressures continue to drag. Some businesses have shifted their target customer base resulting in increased sales. Supply of skilled labor continues to be a persistent challenge weighing on the employment index.

Leading indicators

The new orders indicator contracted at the same rate as March at -20.7. In seasonally adjusted terms it has been shrinking since March 2023.
Input volumes also contracted at the same pace (-13.1) and have been in mild contraction for over a year.
Liaison indicates that uncertainty has become a major inhibitor to future industrial activity. The broader economic slowdown, coupled with uncertainties in global trade, has produced a holding pattern for investment and forward orders.

Prices and wages

Pricing indicators varied in April, but trend data shows industrial inflation continues to ease in 2025.
The sales price indicator fell to -6.3 (seasonally adjusted), while the input prices indicator dropped to 38.5 in April. This suggests that pricing pressure on industries is gradually easing.
The wage price indicator rose by 7.1 points to 39.8, but in trend terms has been steady since mid-2024.
Negative sales price scores indicate industrials are increasingly unable to recoup rising costs through pricing strategies.
Businesses expect major pricing impacts from US trade disruptions and currency fluctuations.

Australian PMI® and PCI®

Both the Australian PMI® (manufacturing) and PCI® (construction) saw improvements in April.
The contraction in manufacturing eased by 3.7 points while construction eased by 10.8 points.
Since mid-2024 construction has been steadily climbing, but manufacturing continues to languish in contraction.
Some manufacturers noted that pre-election uncertainty and currency fluctuations due to US tariffs have intensified competition.
Builders reported delays due to design, procurement, and approval issues, while chronic staff shortages continue to challenge the industry.

Upstream manufacturing

Upstream manufacturing declined slightly in April.
The chemicals index fell 4.2 points to -9.8. This is the lowest score since January this year. Global economic uncertainty due to US tariffs policy and increased materials cost dragged on the industry.
Minerals & metals was stable but remains in deep contraction. Business activity was constrained by increased global competition, federal election uncertainty, and skilled labour shortages.
The decline in minerals and metals since 2021 has shown no sign of reversing, unlike the stabilisation seen in most other Aii covered industrial sectors.

Downstream manufacturing

The machinery & equipment indicator dropped by 5.6 points to -37.3, the lowest result since February 2021.
The decline in machinery was driven by supply chain disruption, weaker capital expenditure and currency fluctuations.
Food, beverages & TCF remained in contraction (-16.6), but was the only sub-sector to show an improvement by 10.6 points in April.
Food and beverage reported export sales were dampened by higher freight costs and increased uncertainty from US tariff policy changes.

Business-oriented services

Business-oriented services improved 4.5 points in April but remained negative at -16.6.
This indicator includes wholesalers, technical services, and supply chain/transport providers.
Some respondents indicated that business activity was constrained by lower client demand, staff shortages, internal delays in design and procurement, and delays in government approvals.
However, others reported increased sales and expansion into overseas markets. Business services is the only Aii subindustry not directly affected by US and others’ tariff policies.

Capacity utilisation

Capacity utilisation in Australian industry moved slightly downwards to 78.4% in April.
Utilisation has been trending down for the past year, but it fell significantly from the range of 79-82% where it had been sustained for last three years to record the lowest rate since mid-2020.
Capacity utilisation was limited by shortages of skilled labour, rising operating costs, equipment constraints, and disruptions in the supply of raw materials.
Geopolitical volatility in the market, federal government election uncertainty and supply chain disruption impacted labour workflow over April.

About the Australian Industry Index

The 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. Read more on our detailed methodology.

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