Australia Ai Group manufacturing index falls deeper into contraction in July

Australia’s Ai Group Industry Index for manufacturing fell further into contraction in July, dropping to -19.6 from June’s upwardly revised -13.9 and partially unwinding the sector’s strongest improvement in eight months. Manufacturers remained under pressure from subdued consumer demand, rising input costs and heavier compliance burdens that squeezed margins. Conditions were mixed across industries: chemicals contracted at a slower pace despite cost volatility and weaker construction demand, metals lost momentum after June’s rebound amid rising costs, customer uncertainty, labour shortages and higher employment expenses, while machinery and equipment recorded its best result since July 2024, supported by mining and defence orders, reduced competition and steady customer sales. Food and beverage also softened as fuel and input costs weighed on margins, although stronger export demand from Europe, Asia and China partly offset weaker domestic orders.