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A new Australian Industry Group report has shown yet another contraction in Australian industry — its 12th in a row.
In April 2023, the Ai Group Australian Industry Index (Aii) dropped 14 points to -20.1 points, seasonally adjusted.
The Ai Group, which represents businesses across an array of sectors, said the year of contraction within Australian industry stemmed from falling demand and activity.
Ai Group Chief Executive Innes Willox said April marked a “disappointing” anniversary for the health of Australian businesses.
“Activity and sales have fallen into contraction as demand is weakening — a pattern now affecting every subsector within industry,” Mr Willox said.
“Yet price pressures and shortages for supply chains and labour remain acute, trapping industry between supply constraints and falling demand.”
Mr Willox said that the RBA’s decision to raise the cash rate by another 25 basis points on Tuesday added greater cause for concern.
“Yesterday’s decision by the Reserve Bank to raise interest rates, while necessary to contain inflation, will add more pain to businesses facing a worsening economic outlook,” Mr Willox said.
The Ai Group’s monthly index, measuring changes in activity across the nation’s industrial sectors also revealed upward pressures on prices were still strong in April, despite inflation having peaked.
The index showed input prices were up 6.1 points to 58.5 points, while sales prices were also up 11.2 points to 21 points in April.
Despite employment dropping just 0.6 points for the month, average wages were up 4.1 points to 35.5 points.
Elsewhere, industrial activity and sales sunk deeply into contraction during the month as a result of a fall in new orders. In April, the index reported a drop of 10.4 points to -30.1 points in April, following a 28.1-point fall in March.
The new orders indicator now sits at its lowest level since COVID shocked the world in April and May of 2020.
Manufacturing, chemicals, food/beverage and business services also reported steep falls in April, with food, beverage and TCFs falling by 34.2 points into deep contraction in April (-32.9 points).
The chemicals industry flipped on March gains, falling 26.6 points to -20.6 points in April – its lowest score recorded in the Aii.
Australian manufacturing fell by 25.8 points to -20.2 points in April, erasing gains made since the new year.
Additionally, the Aii reported that capacity utilisation grew slightly in April to 81.2 per cent amid ongoing labour and supply chain shortages. A high capacity utilisation means a company or sector is operating close to its maximum capacity.
Although having experienced 12 months of contraction, recent reports that inflation has peaked could suggest a recovery may be on the horizon for Australia’s industry.
If inflationary pressures ease and demand picks up, it is likely to boost the performance of the Aussie businesses, in turn supporting economic growth.
