Australian Industry Conditions Sharply Deteriorate: Ai Group

The Australian Industry Index fell 19.9 points to -23.6 in March as the energy crisis hit. The indicator reversed its 2026 recovery with the steepest monthly fall in the series. Domestic demand weakened amid Middle East conflict uncertainty while rising fuel costs and supply chain disruptions weighed on activity. The employment index dropped sharply to -28.7 reflecting levels not seen since May 2020 as weaker activity led firms to consider reducing hours despite persistent skills scarcity. New orders declined 21.7 points to -23.0 as paused projects and lower confidence constrained the pipeline while input volumes fell 12.9 points into contraction. Pricing indicators showed intensifying pressure with input prices rising to 8.5 as energy costs spiked while sales prices rose as firms attempted to pass on costs despite a widening gap between the two indices. Economic activity remains under pressure with capacity utilization falling below the long term average of 77% to 82%.

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.