Contractionary conditions ease for Aussie industries in September – Ai Group

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The Ai Group Australian Industry Index has witnessed a reduction in contractionary conditions, marking an improvement of 8.2 points to reach a seasonally adjusted value of -3.5 points in September 2023. 

According to the Ai Group, this index, responsible for assessing industry conditions and sentiments, had consistently signalled a period of contraction over the past 17 months.

Positive developments were observed in the employment, industrial activity, and new orders indicators, signifying the fourth consecutive month of recovery after experiencing lows in April and May.

Ai Group also reported that price indicators maintained their strong positivity, although input prices and wages have been gradually decreasing from their peak levels in July. 

Additionally, the sales price indicator rebounded after experiencing a significant decline in August.

Various sub-industries displayed mixed conditions in September. The construction indicator notably returned positive results, while business services and downstream manufacturing showed signs of recovery, but upstream manufacturing remains vulnerable.

Innes Willox, chief executive at Ai Group, offered his remarks on the September results, stating that there is a sense of relief for the industry as the Australian Industry Index has indicated improvements in activity, employment, and new orders for the month.

“While the Aii has been growing since a low point in May, it remains in negative territory, with new orders still relatively weak and holding back the pace of the recovery which appears underway,” he said.

Willox noted, “A strong rebound in the Australian PCI construction indicator is welcome news for the housing sector, but weakness in upstream chemicals and metals manufacturing remains a concern.”

The Ai Group Australian Industry Index is a monthly gauge of business activity within the Australian industrial ecosystem. 

It encompasses various sectors, including manufacturing, construction, engineering, technology, and business services, collectively constituting approximately 36 per cent of the Australian economy. 

The index operates on a scale from -100 to 100, where values below 0 indicate contraction, values above 0 signify expansion, and the distance from 0 indicates the strength of the trend, with 20 indicating faster expansion than 10.