FX.co ★ Australia Manufacturing Contraction Softens but Remains Fragile

Australia’s Ai Group Industry Index for manufacturing rose by 4.5 points to -16.8 in June 2026, its highest level since February. The result indicates that the sector’s contraction is easing, although conditions remain fragile.

Manufacturers continued to grapple with rising material costs, uneven demand, limited access to some raw materials, and higher overall business expenses. In construction, firms reported a decline in new orders, leading some to reassess their workforce requirements.

Upstream, chemical producers recorded their sharpest contraction since July 2024, driven by weak sales amid low customer confidence, elevated raw material prices, and increasing freight costs. Metals producers faced intensifying competition, though this was partly offset by a robust project pipeline supported by mining and construction activity.

Downstream, machinery and equipment manufacturers cited subdued customer demand, freight delays, and softer capital investment. In contrast, food and beverage producers reported improving demand, despite persistent uncertainty about the broader economic outlook.