Australian industry sees steady recovery across Q1 2024: Ai Group

The index has indicated contraction for the last 23 months.

In trend terms, all four component indices—activity/sales, employment, new orders and inputs—have been recovering since a low at the end of last year.

However, negative readings for sales and new orders continue to point to overall weak, if improving, conditions in the Australian industry, the Ai Group said in a release.

March saw mixed results in upstream manufacturing. Input prices increased while sales and wage indicators dropped very slightly in the month, suggesting continuing margin pressure on businesses.

The activity/sales indicator rose by 8.4 points in March, but continued to indicate contractionary conditions at minus 8.8 points (seasonally adjusted). It appears the activity indicator hit a low around Christmas 2023, and has been improving across Q1 2024.

The industrial employment indicator moved out of contraction and into mild growth at 4.2.

Some respondents reported increased sales, supply improvement and better labour supply; however, others continued to face challenges recruiting skilled staff.

The new orders indicator was broadly stable in March at minus 16.8. This followed a much steeper contraction across the new year period. This index has been recovering following the low at Christmas. However, it continues to point to weak order books.

Input volume improved to move out of contraction to 10.5. This indicator has mostly been in negative territory for the last two years.

Some respondents noted an uptick in demand as customers had run down inventory; others across the subsectors reported a slower or stable orders.

The Australian manufacturing purchasing managers’ index (PMI) indicator rose by 5.6 points, but remains in contraction at minus 7. The PMI has been improving across 2024.

Manufacturers reported a slow March with continuing difficulties recruiting suitable people for vacant positions and obtaining reliable overseas suppliers.

Capacity utilisation in Australian industry moved upwards to 81.7 per cent in March, following a record high in early 2023. High-capacity utilisation continues to reflect supply-side constraints, particularly for labour supply, the Ai Group noted.

Declining demand conditions reported since the new year have started to translate into loosened capacity constraints, it added.

ALCHEMPro News Desk (DS)