Analysis and Commentary

New orders evaporate in March, manufacturing rebounds – AiGroup

Analysis and Commentary

The Ai Group Australian Industry Index (Aii) fell in March 2023, dropping 4.4 points to -6.1 points (seasonally adjusted). This indicates mildly contractionary conditions.

The index, which complements the Australian Performance of Manufacturing Index, and also covers business services sectors including utilities, transport, ICT and technical services, has been in contraction since May 2022.

Key findings for March 2023 suggest Australian industry slipped further into contraction in March on the back of falling demand.

The new orders indicator collapsed by 28.1 points to -19.8. This is the largest single monthly fall in new orders on record for the Aii, exceeding the April 2020 fall caused by covid shutdowns.

Activity/sales remained in negative territory, while employment growth slowed. Price pressures eased, but all price indicators remain in significant expansion.

However, manufacturing rebounded in March, led by a recovery in the chemicals and food & beverage sectors. Construction remained in mild contraction and business services fell into steep contraction.

Capacity utilisation eased to 79.6 percenty but remains above its post-pandemic average (78.9 percent).

Chief Executive of the employer association Ai Group Innes Willox said: “Industry is beginning to feel the effects of a slowing Australian economy.

“Business reported rapidly falling new orders in March, as uncertainty regarding the economic outlook begins to weigh on business planning. Inflation appears to have peaked in late 2022, but input and wage pressures on industry remain strong.

“While industry reports easing supply chain and energy cost pressures, deteriorating demand conditions are casting an ominous shadow over the months ahead.”

Willox said yesterday’s decision by the Reserve Bank Board to leave interest rates on hold provided welcome respite for households and businesses alike.

Picture: Innes Willox

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