The Ai Group’s newly launched Australian Industry Index has dropped 10.5 points to -11.6 points in December/January 2023, marking the industry’s ninth month of contraction since May 2022.
The longstanding Australian Performance of Manufacturing Index and Australian Performance of Construction Index will continue in a slightly modified form in the new single monthly report and will cover business services sectors including utilities, transport, ICT and technical services.
According to Ai Group CEO Innes Willox, the initial report of the new Ai Group Australian Industry Index highlights the significant pressures facing Australia’s industrial sector in 2023.
“Longstanding supply constraints eased slightly over the December-January period and input prices continued to rise although the extent of increases fell dramatically,” Willox said.
“The pace of sales price rises and wage increases also eased in the December-January period supporting the view that inflation may have peaked towards the end of 2022,” the CEO continued.
Willox also explained that as the economy slows as a result of the policy emphasis on lowering inflation, there are signs of weakening demand in the industrial sector, with sales and new orders falling and employment growth slowing.
He added that manufacturers and business service providers that use a lot of energy are reporting the steepest declines in activity so far.
“With the Reserve Bank deciding to raise the cash rate further, the decline in industrial sector activity underlines the risks of an excessive tightening of policy over coming months,” Mr Willox said.
