Industrial employment falls into contraction

The Ai Group Australian Industry Index was in contraction in May 2023 but to a lesser extent than April, as the decline eased 9.3 points to -10.9 points (seasonally adjusted). This indicates deteriorating conditions. The index has been in contraction for the last 13 months.

Key findings for May 2023:

• Industry continued to report declines but to a lesser extent than in April; the index remains in overall contraction.
• The employment indicator fell into negative territory in May, following similar falls for new orders (in March) and activity/sales (in April).
• Price indicators eased from very high levels, consistent with inflationary pressures peak. However, they remain very elevated over neutral.
• All industrial subsectors recorded contractions in May. Upstream manufacturers posted steep declines, while the fall for downstream manufacturers eased but remains in contraction.
• Capacity utilisation grew marginally to 82.8%, reflecting ongoing labour and supply chain shortages.

Innes Willox, chief executive of the national employer association Ai Group said, “Employment levels in industry were reported to have moved into contraction in May. As the Australian economy slows, this is an unfortunate but expected result, as it follows indications of falls into contraction for new orders in March and activity/sales in April. While price pressures are moderating, they remain highly elevated. Last week’s decision by the Fair Work Commission to raise minimum wages by 5.75% will add further upwards pressure to wages, putting more strain on employment at a time when industry is already facing cost, wage and demand pressures. The increase in interest rates flowing from yesterday’s meeting of the RBA Board will further dampen activity and confidence for the industrial sectors of the economy.”