Analysis and Commentary

Industry contracts further in July – AiGroup

Analysis and Commentary

The manufacturing sector has continued its trend towards contraction in July, with the Ai Group Australian Industry Index losing 2.8 points to -14.7 points – the broad gauge
of industry conditions has been negative for the past fifteen months.

Meanwhile the Australian PMI indicator which focuses more closely on manufacturers 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 in the index 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.

And capacity utilisation fell marginally to 79.0 percent, reflecting slowing industrial conditions.

The Chief Executive of employer association Ai Group Innes Willox 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.”

Willox said 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.”

Picture: Innes Willox

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