Australian industry activity sees slower decline in May— Ai Group

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The Ai Group’s Australian Industry Index has seen a moderated contraction in May 2023 and now stands at -10.9 points, up by 9.3 from April’s steep fall, signalling deteriorating conditions in the market and the 13th month the index has been in contraction. 

The Ai Group report revealed that employment levels fell into negative territory in May– an anticipated result as it follows indications of a fall into contraction for new orders in March and activity/sales in April, according to Ai Group CEO Innes Willox. 

The contraction in the Australian PMI for manufacturing eased by 15.1 points but remains in mild contraction. 

Upstream manufacturing continued a steep decline that began in April, with the chemical index -29.6 – the lowest score for the chemicals sector in the survey’s history, which began in January 2020. 

Minerals and metals fell dramatically into contraction at -30.1, the lowest result since May 2020. Energy prices have eased but upstream manufacturers reported major demand-side pressure in the form of falling new orders. 

Meanwhile, the machinery and equipment sector recovered slightly to be broadly stable at -2.0. 

The contraction in the consumer-facing food, beverage and TCF industry eased by 28.4 points to be mildly negative. 

Skilled labour shortages remain acute for machinery manufacturers, while new orders remained weak. 

Machinery manufacturers have also reported a decline in new orders as the economy slows down and business confidence decreases. 

“Last week’s decision by the Fair Work Commission to raise minimum wages by 5.75% will add further upwards pressure to wages, putting more strain on employment at a time when industry is already facing cost, wage and demand pressures,” CEO Willox said. 

“The increase in interest rates flowing from yesterday’s meeting of the RBA Board will further dampen activity and confidence for the industrial sectors of the economy,” Willox added.