Australian Industry Conditions Improve: Ai Group

The Ai Group Australian Industry Index lifted 9.0 points to -1.5 seasonally adjusted in February. The indicator has continued to recover through 2025, but activity remains flat. Domestic demand remained subdued amid soft conditions, while regulatory pressures, skills shortages, and rising input costs continued to weigh on activity, partly offset by significant growth in business services and stronger enquiry conversion rates. The employment index moved into positive territory for the first time in three years, rising to +12.8, reflecting firms retaining labor in anticipation of a gradual recovery despite persistent skills scarcity. New orders improved in February, rising 11.4 points to -2.1 as the 2026 work pipeline began to flow through, while input volumes rose sharply to 8.1, moving back into positive territory. Pricing indicators showed persistent pressure, with input prices rising and sales prices holding steady, while wages remained elevated.

The Ai Group Australian Industry Index edged up 0.2 points to -12.3 seasonally adjusted in December/January. The indicator has continued to recover through 2025, but activity remains mixed. Domestic demand remained subdued amid seasonal challenges, while economic uncertainty, rising input costs, regulatory pressures and labour shortages continued to weigh on activity, partly offset by stronger construction inquiries and improved conditions in metals and food industries. The employment index was broadly stable at -4.7, reflecting ongoing difficulties in securing suitable staff, with some firms scaling back operations and others holding vacancies amid persistent skill shortages. New orders improved in December/January, rising 4.1 points to -14.2 as the 2026 work pipeline began to flow through, while input volumes fell slightly to -15.7, contracting at a similar pace to November. Pricing indicators eased modestly, with both input and sales prices declining, while wages remained elevated.

The Ai Group Australian Industry Index declined 0.6 points to -12.5 seasonally adjusted in November. The indicator has continued to recover through 2025, but activity remains mixed. Domestic and some export demand was subdued and customer hesitation, project delays, weather impacts and increased offshore sourcing offset gains in parts of the economy. The employment index fell 5.9 points to -5.9, reversing October’s gains, as firms typically chose not to replace leavers and widespread skill shortages continued to limit productivity while some firms shelved vacancies. New orders and input volumes both deteriorated in November, but trend data show the recovery in new orders has stalled since June—respondents cited erratic demand, fewer enquiries, project delays and rising offshoring. Pricing indicators point to re-emerging cost pressures: the input price indicator rose 6.3 points, while sales prices and wages were broadly steady as more firms sought to pass on higher input costs.