Contractionary conditions continue – Ai Group

The industrial economy continues to contract in response to higher interest rates according to the latest data released by employer group the AiGroup.

The group’s Australian Industry Index, which is broader than its companion Performance of Manufacturing Index, fell in June 2023, losing 1.1 points to minus 11.9 points (seasonally adjusted).

The index has indicated contracting conditions for fourteen months since the start of the current interest rate rising cycle.

Meanwhile the Australian PMI manufacturing indicator fell further into contraction, led down by the chemicals industry. The Australian PCI construction indicator recovered into expansion after several poor months.

Price indicators all rose mildly in June, suggesting inflationary pressures are not yet over. The indicator of average wages surged by 11.6 points in the tight labour market.

Capacity utilisation fell marginally to 80.8 percent, reflecting ongoing labour and supply chain shortages.

Chief Executive of Ai Group Innes Willox said: “Australian industry continues to struggle with weakening economic conditions.

“Indicators of new orders, employment and activity/sales all continue to point to contraction.

” While consumer inflation in Australia has now peaked, pricing indicators show that upwards price pressure for inputs and wages remains for industry.”

Willox said that a weak employment indicator was a particular concern, coming at a time when the national economy is slowing, unemployment is creeping up, and industry is adapting to increasingly worsening conditions.

“The decision by the Reserve Bank to leave interest rates unchanged reflects this slowing environment and will provide some relief for the industrial sector and households.”

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