The Ai Group Industry Index indicates that Australia's manufacturing sector continued to experience contraction through December and January, reflecting persistently weak conditions overall. Mixed trends were observed across the sector: subdued demand, tariffs, rising input and wage costs, poor cash flow, and labor constraints continued to suppress output. Nevertheless, there were limited areas where improved orders provided some relief. The chemicals sector saw a significant decline, with its index plunging to -35.3, attributed to seasonal slowdowns, market uncertainty, and increased tariffs impacting sales negatively. In contrast, the minerals and metals index showed improvement, climbing to -25.9. This was driven by the availability of cheaper imported inputs and an uptick in new orders, although these gains were somewhat offset by reduced holiday demand and ongoing export pressures. The machinery and equipment index also saw a decline, falling to -22.3 as a result of diminished investment, escalating costs, labor shortages, and sluggish holiday orders, though some companies experienced modest gains. The food, beverages, and textiles, clothing, and footwear (TCF) sector eased to -9.4. While festive-season sales were strong, they were counterbalanced by increased costs due to wages, inputs, energy, and taxes.