Industry treads water in February after difficult new year

The Ai Group Australian Industry Index® rebounded in February 2023, gaining 9.8 points to minus-1.8 points (seasonally adjusted) indicating broadly stable conditions for the month. The index has been in contraction for ten of the past twelve months (Values below 0 indicate contraction, and above 0 indicate expansion. The distance from 0 indicates how widespread the change is: 20 is more widespread expansion than 10).

Key findings for February 2023:

• Australian industry was broadly flat in February following a difficult new year period.
• New orders surged back into positive territory, and employment continued a steady rise. Activity levels remain in overall contraction, but declined at a slower pace relative to December/January.
• The input price and wages indicators grew rapidly again, indicating broadening inflationary pressures for industry. The sales price indicator fell and remains below the input and wages measures.
• Manufacturing arrested its sharp decline over the new year, as did business services and minerals & metals. Construction fell into mild contraction while food & beverages turned down after a robust new year period.
• Capacity utilisation eased to 82.1% but remains above its long-run average (78.3%).

Innes Willox, Chief Executive of the national employer association Ai Group said: "After a sharp contraction in the December/January period, Australian industry was broadly flat in February. New orders grew strongly in the month, while employment levels continued to grow and the pace of decline in activity eased. Indicators show that inflationary pressures – wages and inputs – are continuing to broaden for industry, but sales price rises are much less widespread. Businesses report that labour shortages, particularly for skilled roles, remain acute. The flat conditions reported by industry in February reflect the RBA's measures to slow activity and prevent a step-up in inflation expectations," Mr Willox said.

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