AUSTRALIAN INDUSTRY INDEX

Construction continues to contract

Key findings

The Australian Industry Index® indicated contracting conditions in April, for the twenty-fourth month since the start of the current interest rate cycle.
While most activity indicators weakened slightly in April, in trend terms industrial activity continues to rebuild following a nadir around the new year period.
The Australian PCI® indicator fell to -25.6, showing that the contraction in the construction sector has continued to deepen. Poor sales conversions have compounded supply chain and labour pressures on the industry.
All subindustries continue to report contraction, with chemicals posting a steep decline in April. Minerals & metals and business services have recovered strongly since the new year and are close to returning to neutral readings.

The Ai Group Australian Industry Index® fell in April 2024, losing 3.6 points to -8.9 points (seasonally adjusted). The index has indicated contractionary conditions for the last twenty-four months.

April 2024

Contribute to this data

Industry activity

The activity/sales indicator slipped further in April, falling by 3.6 points to -8.9. It has now been negative for 22 consecutive months.
On a trend basis, the industrial activity indicator reached a low point around the new year period, and has been recovering through early 2024.
The employment indicator fell slightly by 2.2 points in April but remained positive at +2.0. On a trend basis employment has been strengthening since last winter.
Survey respondents reported difficulties in attaining skilled labour, and weak sales conversion rates particularly from the construction sector.

Leading indicators

New orders fell by 3.1 points to -20.0 in April, following a 0.4-point fall in March.
In trend terms, new orders have been recovering since a low around the new year period, but the indicator continue to point to significant contraction.
The improvement in input volumes continued in April, and in trend terms volumes have returned to neutral.
Businesses report continuing supply chain disruptions, alongside lower purchasing demand as new orders and input volumes fall.

Prices and wages

Growth in input prices and average wages indicators slowed in April, while it increased for sales prices.
Growth in input prices continue to ease (in trend terms) since the peak in March 2022, however the indicator remained historically elevated at +40.2.
The average wages indicator fell in April, easing consecutively for a second month in 2024.
Sales prices rose modestly by 2.6 points to +18.7. The gap between the input and sales price indicators narrowed to 21.5.

Australian PMI® and PCI®

The Australian PMI® (all manufacturing) dropped by 6.9 points further into contraction (-13.9) in April. However, in trend terms the PMI has been slightly improving across 2024.
The Australian PCI® (construction) fell for the sixth month to move further into contraction (-25.6). In trend terms, construction continues to decline.
Manufacturers reported rising input and utilities prices, while facing soft market demand and sluggish export orders to some regions.
Constructors reported challenges in converting leads to orders, which were highly influenced by inflation, interest rates, and a general lack of confidence in the residential building sector.

Upstream manufacturing

Upstream manufacturing fell into contraction in April.
The chemicals industry has been highly volatile since late 2023, with dramatic monthly swings. In trend terms however, chemicals have been steadily in significant contraction across the year.
Minerals & metals recovered by 12.5 points in April. While it remains in contraction, in trend terms the subsector has been recovering since a winter 2023 low.
Some upstream manufacturers reported increased input costs and higher wage pressures. Producers also mentioned softening export demand and lack of skilled labour inhibiting their business.

Downstream manufacturing

The machinery & equipment indicator improved by 0.5 points in April, to be broadly stable at -1.0.
Machinery manufacturers reported an increase in new orders and higher availability of skilled labour, a significant difference from most other industrial respondents.
Food, beverages & TCF – a highly volatile industry – dropped to -18.7 in April.
Food and beverage manufacturers reported poor demand conditions due to uncertainty in the market.
Some also noted that various government policies and higher prices compressed food manufacturer margins.

Business-oriented services

Business-oriented services improved 4.5 points in
April, climbing into positive territory for the first time in a year.
This indicator includes utilities, technical services, and supply chain/transport providers.
Business services have improved strongly since the new year break, having been in contraction for nearly two years now.
Services businesses reported increased sales and new orders.
Some noted shortages of specific skilled occupations, poor governance and higher prices also constrained capacity to deliver existing projects.

Capacity utilisation

Capacity utilisation in Australian industry moved slightly downwards to 80.2% in March.
This followed a downward trend seen since last year capacity utilisation ranged between 79-82% for most of 2023.
However, the historically high-capacity utilisation continued to reflect supply-side constraints, particularly for labour supply.
Some survey respondents indicated that older orders on the books continue to utilise capacity despite the downturns in new orders in recent months.

About the Australian Industry Index

The Australian Industry Index is a monthly index that measures changes in activity in Australia’s industrial sectors. It provides diffusion indices which measure rates of changes in the level of industrial activity – expansion, stability or contraction. A positive reading indicates the activity is expanding; negative indicates contraction. The distance from 0 indicates the strength of the expansion or decline.

The Australian Industry Index is based on monthly surveys from a national sample of Australian businesses. It uses ANZSIC industry codes for classifying sectors, and weights survey results using ABS data on gross value added by sector. Seasonal adjustment and trend calculations follow ABS methodology. Read more on our detailed methodology.

© The Australian Industry Group, 2023. This publication is copyright. Apart from any fair dealing for the purposes of private study or research permitted under applicable legislation, no part to be reproduced by any without the prior written permission of The Australian Industry Group.

Disclaimer: The Australian Industry Group provides information services to its members and others, including economic policy and information services. None of the information provided here is represented or implied to be legal, accounting, financial or investment advice. The Australian Industry Group does not invite and does not expect any person to act or rely on any statement, opinion, representation or interference expressed or implied in this publication. The Australian Industry Group accepts no responsibility for any act or omission by any person relying in whole or in part upon the contents of this publication.