The Ai Group Australian Industry Index posted a rating of -14.7 points in July, indicating contractionary conditions and marking the index’s 15th month in the negative territory.
The Australian PMI indicator for manufacturing slipped by 5.8 points to -25.6 for the current month as the sector sees weak business activity levels not seen since the height of the COVID-19 pandemic.
The employment, industrial activity, and new order indicators all slipped further to contraction.
The new order trend has been in contraction for six of the last seven months, currently posting a 3.6 decrease to -19.4 in July.
Businesses across all subsectors said they experienced a very quiet ordering period and reported that supply chains continue to be impacted by ongoing shortages and delays.
Price indexes increased in July, albeit moderately— a result of lower but still persistent inflation. The average wages indicator rose to 14.0 points in June, marking the highest monthly increase in a year. The Ai Group report said this comes with the ongoing tightness in the Australian labour market.
Upstream indicators moved in different directors in July but remained in the contraction territory. Manufacturers in this sector reported staff turnover interrupting operations and stronger input price pressure in overall operational cost, which led to higher selling prices.
Meanwhile, downstream manufacturing remained resilient and is still in expansion despite a slight drop in July. Labour shortages remained acute for machinery manufacturers, while the higher logistics cost continued to affect the margin.
“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,” said Innes Willex, CEO of the Ai Group.
“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,” Willex said.
