The latest Ai Group Australian Industry Index for June shows that the manufacturing sector remains in contraction, with the index rising 14.7 points to -25.6 points, marking 26 consecutive months of decline.
Key manufacturing indicators point to continued challenges within the industry. Activity, sales, new orders, and employment showed a slight rebound after a particularly weak May but remained in negative territory, indicating persistent struggles.
According to the report, input prices and wages significantly increased in June, highlighting ongoing cost and inflation pressures.
Capacity utilisation marginally rose to 76.5 per cent, reflecting continued supply-side pressures, particularly for labour.
In particular, food manufacturing was the only sub-industry to report expansion in June, with a notable growth of 11.8 points.
In trend terms, the food, beverages, and TCF (textiles, clothing, and footwear) sector has been recovering throughout 2024.
Respondents noted strong demand and increased interest from overseas customers, despite the impact of inflationary pressures.
The chemicals industry continued its recovery, lifting 9.9 points to -8.6. Conditions in this sector have been improving steadily throughout 2024, with manufacturers reporting increased customer demand, improvements in overseas orders, and growth in long-term projects.
Machinery and equipment improved by 1.3 points to -4.8, indicating a broadly stable performance. Manufacturers in this sector reported increased export sales, improved customer confidence, and an uptick in new orders.
The minerals and metals sector continued to decline, falling by 8.7 points. This marks the lowest result for minerals and metals manufacturers since the index began in 2020.
The Australian PMI (all manufacturing) indicator increased by 4.7 points in June but remains in contraction at -26.5.
The Australian PCI (construction) indicator saw a significant improvement, easing by 44.9 points from May’s deep contraction to -23.2.
Despite these changes, construction has been deteriorating since mid-2023, while manufacturing has consistently experienced mild contraction.
According to Ai Group, manufacturers have reported lower orders, rising input prices, and increased competition for skilled staff.
Constructors have faced supply delays, input cost pressures, and a widespread decline in customer confidence.
