New orders evaporate in March

The Ai Group Australian Industry Index® fell in March 2023, dropping 4.4 points to -6.1 points (seasonally adjusted). This indicates mildly contractionary conditions. The index has been in contraction since May 2022.

Key findings for March 2023:

• Australian industry slipped further into contraction in March on the back of falling demand.
• The new orders indicator collapsed by 28.1 points to -19.8. This is the largest single monthly fall in new orders on record for the Aii, exceeding the April 2020 fall caused by covid shutdowns.
• Activity/sales remained in negative territory, while employment growth slowed. Price pressures eased, but all price indicators remain in significant expansion.
• Manufacturing rebounded in March, led by a recovery in the chemicals and food & beverage sectors. Construction remained in mild contraction and business services fell into steep contraction.
• Capacity utilisation eased to 79.6% but remains above its post-pandemic average (78.9%).

Innes Willox, Ai Group Chief Executive: “Industry is beginning to feel the effects of a slowing Australian economy. Business reported rapidly falling new orders in March, as uncertainty regarding the economic outlook begins to weigh on business planning. Inflation appears to have peaked in late 2022, but input and wage pressures on industry remain strong. While industry reports easing supply chain and energy cost pressures, deteriorating demand conditions are casting an ominous shadow over the months ahead.  Yesterday’s decision by the Reserve Bank Board to leave interest rates on hold provides welcome respite for households and businesses alike,” Mr Willox said.

The Ai Group Australian Industry Index® is a monthly index of business activity in the Australian industrial ecosystem. It includes the manufacturing, construction, engineering, technology and business services sectors, which together account for approximately 36% of the Australian economy. It reports on a -100 to 100 scale. Values below 0 indicate contraction, and above 0 indicate expansion. The distance from 0 indicates the strength: 20 is expanding faster than 10.

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About the Ai Group Australian Industry Index®

The Ai Group 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. For the detailed methodology, please visit https://www.aigroup.com.au/resourcecentre/research-economics/australian-industry-index/FAQs/

When referring to the Ai Group Australian Industry Index® the source should be attributed as “Australian Industry Group”.