Australia’s manufacturing industry slipped further into contraction territory in June, led down by the chemicals industry, according to the latest survey from the Ai Group.
The Ai Group Australian Industry Index fell by 1.1 points to -11.9 as tightening conditions continued to plague Australia’s industry at the end of the second quarter of the year.
Upstream manufacturing remained in contraction, with the chemicals index falling to -41.3— the lowest score for the sector recorded since the Ai Group survey began in 2020.
The minerals and metals sector saw a recovery of 11.0 points but also remains in contraction.
Upstream manufacturers reported a significant hike in utility costs, rental costs, raw material supply costs, and labour costs.
Meanwhile, the machinery and equipment sector index recovered to be broadly stable and out of contraction.
The food, beverage & TCF index eased by 24.2 points to be well above neutral. Supply chain pressures remained acute for machinery manufacturers, while the demand condition remained stable.
According to the survey, the activity/sales indicator eased back from the large fall posted in April but continues to be in contraction at -13.5. Industrial activity has been on a decline since July 2022.
Businesses have reported a notable increase in absences due to COVID and flu cases in June, leading to a 1.1-point decline in the employment indicator— the lowest employment score since the height of the pandemic in July 2020.
New orders have declined again after a modest recovery in May, falling by 7.4 points into a deeper contraction at -15.8 points. Survey respondents said they have seen very low new sales queries in June, led down by the construction sector.
Meanwhile, pricing indicators remain elevated despite inflation peaking in Australia.
The input, sales, and average wages indicators all increased slightly in June, and are all above the neutral level. The average wages indicator rose 11.6 points in June, its highest monthly increase in a year.
