Australian Industry Continues Decline: Ai Group

The Australian Industry Index rose 6.4 points to -19.1 in October 2026 from September, indicating a slight improvement in business conditions, although the index remained firmly in negative territory. Activity, employment, new orders and input indicators all improved modestly but continued to signal weak conditions. Activity remained constrained by subdued sales, weaker demand and fewer orders, despite some improvement ahead of Christmas. Cost pressures intensified as higher fuel prices continued to feed through supply chains. However, weak market conditions have limited businesses’ ability to pass these costs on, putting further pressure on margins. Manufacturing remained particularly affected by rising costs, with no clear signs of recovery. Downstream manufacturers faced additional challenges from a weakening consumer economy. Business services and construction also improved in October compared with September, but conditions in both sectors remained weak by historical standards.

Australia’s Industry Index plunged to -24.2 in September from a revised -1.6 in the previous month, underscoring mounting uncertainty as volatile prices and market conditions stifle investment, orders, and planning. Firms reported growing difficulty accessing finance, while cost pressures stayed high amid a second wave of fuel and downstream price rises that reignited inflation. The activity/sales indicator collapsed 28.5 points to -31.0, returning to deep contraction, and employment fell back into negative territory at -15.6, erasing August’s gains. New orders fell 22.4 points to -35.9, reversing prior gain, while input volumes weakened to -12.9. Input prices eased 10.6 points to 56.8, yet sales prices rose 13.0 points to 13.6, hinting at improved cost pass-through. The gap between input and sales prices remained wide at 43.2 points, leaving margins under strain despite partial relief. Capacity utilisation eased to 77.2% despite rising costs, labor shortages, and intense competition.

Australia’s Industry Index surged to -3.5 in August from a revised -26.3 in the prior month, its highest since February, signaling a sharp rebound in business conditions. Construction and business services led the recovery, buoyed by data centre projects. Activity and sales jumped 31.2 points to -2.2, new orders rose 15.9 points to -14.9, and employment gained 24.9 points to 3.0, all at their strongest since the energy crisis began. Firms reported mixed fortunes: some secured contracts and project wins, while others faced weaker sales and enquiries. Input volumes remained constrained by supply-chain disruptions, elevated costs, and geopolitical uncertainty. Pricing indicators diverged: input prices climbed 10.8 points to 68.0, while sales prices fell 13.1 points to 0.2, leaving a record 67.8-point margin gap. Average wages rose 16.9 points, reflecting annual increases at the start of the new financial year, underscoring persistent labor cost pressures despite headline improvement.