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Consumer-facing industries contract

Key findings

  • The Ai Group Australian Industry Index® sank deeper into contraction in November on the back of falling demand and activity.
  • The activity/sales, new orders and input volumes indicators all materially fell in the month. Employment increased marginally.
  • November is the lowest Aii reading since June 2020. On a trend basis, all four activity indicators point to contractionary conditions.
  • Upstream manufacturers showed improvement, but consumer facing industries (food and construction) posted large declines.
  • November saw a modest increase in input costs, but a decline in sales price and average wage indicators.

The Ai Group Australian Industry Index® fell in November 2023, dropping 12.5 points to -22.4 points (seasonally adjusted). This indicates strongly contractionary conditions. The index has indicated contraction for the last nineteen months.


November 2023

Industry activity

  • The activity/sales indicator slipped further in November, falling by 12.8 points to -29.6 indicating a broader contraction across industries in the Ai Group Australian Industry Index®.
  • On a trend basis, the industrial activity indicator has been negative for 19 months.
  • The employment indicator recovered slightly (+3.6 gain) but has been in mild contraction since Easter.
  • Most survey respondents reported falling sales in November as they have since May 2022. Employment remains constrained by labour shortages, particularly for skilled roles.

Leading indicators

  • The new orders indicator fell by 12.6 points to -29.9 in November, after an easing in contraction in September, but the index has been negative since March 2023.
  • On a trend basis, the new orders indicator has been negative since July 2022.
  • Many survey respondents reported slowing orders during the month, while a few reported stable orders.
  • The input volumes indicator dropped sharply by 32.8 points to land at -20.3.
  • Survey respondents reported falling volumes in orders as business slowed, while some pockets of industry struggled with supply chain challenges.

Prices and wages

  • The input prices indicator rose modestly in November, while the sales price and average wage indicators decreased.
  • Sales prices were broadly stable but recorded their lowest result since October 2020.
  • The gap between the input and sales prices indicators widened to 49 points, indicating growing pressure on industrial margins.
  • The average wages indicator fell slightly and remains below the peak of mid-2022. At +30.5 it indicates that market pressures for wage growth remain strong.

Australian PMI® and PCI®

  • The Australian PMI® (all manufacturing) dropped by 4.4 points further into contraction (-25.3). In trend terms the indicator has been negative since September 2022.
  • The Australian PCI® (construction) fell back into negative territory at -22.2, reversing two months of positive results.
  • This is the lowest monthly score for the construction indicator since August 2021.
  • Manufacturers reported shortages and delays with supply chains, as well as challenges recruiting suitable staff.
  • Constructors reported a slowdown in property markets due to the cumulative effect of interest rate hikes and broad increases in cost of living for consumers.

Upstream manufacturing

  • Upstream manufacturing indicators rebounded in November, but remain well in negative territory.
  • Chemical manufacturing continued a recovery trend in November, growing 3.6 points to -8.1.
  • Minerals & metals grew by 27.8 points but remains in broad contraction (-9.3) and remains on a downward trend.
  • Upstream manufacturers reported concerns regarding skilled labour shortages and outlook uncertainties.
  • Some respondents reported lower orders due to cost pressures on customers.

Downstream manufacturing

  • The machinery & equipment index dropped by 4.8 points in November but continued to report mild expansion (9.3) for the month.
  • Labour shortages remained acute for machinery manufacturers, while higher logistics cost continued to put pressure on margins.
  • The food, beverages & TCF index fell by 20.3 points, to be well into contractionary territory at -24.8.
  • Food and beverage manufacturers reported declining export orders, and slower local demand due to the impact of higher interest rates and cost sensitivity of customers.

Business-oriented services

  • The business-oriented services indicator remained in contraction (-22.4) despite a slight rise of 1.2 points in November.
  • This indicator includes utilities, technical services, and supply chain/transport providers.
  • The business services index has been on a downward trend from early 2022.
  • Services businesses reported customers being slow to make investment decisions due to uncertainty in the market and the increased cost pressures.

Capacity utilisation

  • Capacity utilisation in Australian industry moved slightly upwards to 81.1% in November.
  • This follows a record high in January – utilisation has been trending down and ranged between 79-82% for most of 2023.
  • High-capacity utilisation continues to reflect supply-side constraints, particularly for labour supply.
  • Declining demand conditions since the start of 2023 have yet to translate into loosened capacity constraints.

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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Disclaimer: The Australian Industry Group provides information services to its members and others, including economic policy and information services. None of the information provided here is represented or implied to be legal, accounting, financial or investment advice. The Australian Industry Group does not invite and does not expect any person to act or rely on any statement, opinion, representation or interference expressed or implied in this publication. The Australian Industry Group accepts no responsibility for any act or omission by any person relying in whole or in part upon the contents of this publication.