Contractionary conditions continue  

The Ai Group Australian Industry Index fell in June 2023, losing 1.1 points to -11.9 points (seasonally adjusted). This indicates contractionary conditions. The index has been in contraction for the last fourteen months.

The contraction indicated by the Ai Group Australian Industry Index continued in June. The index has indicated contracting conditions for fourteen months since the start of the current interest rate rising cycle. Employment, industrial activity and new orders indicators all continue to point towards contraction.

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%, reflecting ongoing labour and supply chain shortages.

Innes Willox, chief executive of the national employer association Ai Group 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. The weak employment indicator is 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,” Mr Willox said.