FX.co ★ Australia Manufacturing Contraction Eases Sharply

Australia’s Ai Group Industry Index for manufacturing remained in contraction in September, though the downturn eased. The index rose to -8.7 from August’s revised -14.9, its highest reading since May 2023. The sector remained under strain as weaker domestic demand, rising input costs, and wage pressures weighed on both customers and businesses, leading to delayed investment decisions and softer order volumes.

Upstream industries continued to contract, with firms citing higher costs for materials, freight, utilities, and fuel, alongside subdued demand, intensified competition, and shipping disruptions linked to the Middle East. The metals sector faced additional headwinds from softer orders, increased import competition, and regulatory constraints.

By contrast, conditions improved downstream. Machinery manufacturers reported rising demand, and food and beverage producers also posted stronger orders. Other industries noted an accumulation of inventories and further increases in utility costs.