Uncertainty factors, particularly disruptions caused by US trade policies, forex volatility and the Australian federal election, are now affecting industrial markets and activity.
While cost pressures further ease, the sales price indicator has fallen to neutral, indicating ongoing pressure on industrial margins.
The seasonally-adjusted Australian industry index fell slightly by 3.1 points to minus 22.2 in March this year, according to the Ai Group.
The index has indicated contraction for the last 33 months.
Uncertainty factors, particularly disruptions caused by US trade policies, forex volatility and the Australian federal election, are now affecting industrial markets and activity.
Demand remained weak.
Demand remained weak, as both new orders and activity indicators were affected by uncertainty factors.
Manufacturing and construction both performed poorly in March. While the construction indicator has improved since late 2024, manufacturing continues to point to entrenched contraction.
The activity/sales indicator contracted further in March, falling further by 7.7 points to minus 31.5. The trend data points to falling industrial activity over the first quarter this year, a release from the Ai Group said.
The decline in employment eased, lifting by 5.8 points to minus 7.3 points. Industrial employment has improved in trend terms in early 2025 since a low point in the fourth quarter of 2024.
Businesses reported a pause in activity leading attributed to election uncertainty and natural disasters such as bushfires and cyclones.
Customer confidence has been hit by global uncertainties, including US tariff policy changes.
The contraction in new orders worsened by 3.7 points, falling to minus 25 in March. The indicator has been steady across the first quarter of 2025 following some recovery in the second half of 2024.
Input volumes fell by 8.6 points to minus 11.4 following stable results in February. In trend terms, input volumes have been contracting since late 2023.
Demand decreased again in March with very lower enquiries. The general economic slowdown and global uncertainty are also beginning to effect trade and product flows in global supply chains.
Pricing indicator moved in different directions in March. However, trend data suggests industrial inflation is continuing to ease through early 2025.
The sales price indicator has been close to neutral since late 2024, indicating that industrials are no longer able to pass on rising costs through their pricing.
Wage and input price indicators have been steadily declining for a year, but remain far higher than sales and thus still point to pressure on industrial margins.
Businesses anticipate significant impact from trade disruption emanating from the United States.
The Australian purchasing managers’ index (PMI) for manufacturing fell by 17.8 points, continuing to indicate contraction at minus 29.7. Some manufacturers reported loss of customers with the slowing economy. Moreover, US tariffs and a weak AUD are affecting the supply of raw materials.
Upstream manufacturing eased slightly in March. The chemicals index fell from the improvement by 5.8 points to minus 3.4. Chemical manufacturers reported slower sales demand due to natural calamities in part of the country and global economic uncertainty.
Capacity utilisation in Australian industry moved down slightly to 79 per cent in March. Utilisation has been trending down since the start of 2024 and is now below the post-pandemic average of 80.4 per cent.
Capacity utilisation was constrained by labour shortages, equipment limitations and disruptions in raw material supply.
Volatile demand for new orders and sales affected labour availability and workflow over March.
Fibre2Fashion News Desk (DS)