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Australian Industry Easing, Facing Energy Crisis: Ai Group Report

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Australian Industry Easing, Facing Energy Crisis: Ai Group Report

Persian Gulf turmoils aggravated an already softening Australian industrial sector in May, reported the Australian Industry Group (Ai Group) on Wednesday.

The Australian Industry Index "remained weak" in May, declining to a negative seasonally adjusted 26.5 from a negative 25.5 in April, due in part to the "energy crisis, which is weighing heavily on new orders," reported Ai Group.

A reading below zero on the Ai Group Industry Index indicates that the manufacturing, and related services sectors are contracting, compared to the previous month.

Australian manufacturers in May reported widespread delays in orders and capital outlays, while the future path of energy supplies and prices remains unresolved, said Ai Group.

In addition, in May manufacturers faced rising costs of operation, even as easing demand limited the capacity to raise prices to customers.

"Rising input costs (28%) remained the dominant pressure on businesses in May, with widespread reports of higher fuel, freight and raw material costs, including plastics, resins, packaging and metals," said AI Group. "Wages growth picked up, adding to ongoing labor cost pressures."

Some industry leading-indicators pointed lower in May. The Ai Group new orders sub-index declined to negative 34.6 in May from negative 28.3 in April, pointing to waning demand.

"Businesses reported a sharp decline in new orders, with customers scaling back re-orders and forward pipelines thin as uncertainty suppresses new investments," said Ai Group.

Services related to manufacturing businesses also faced challenging conditions in the month. The Ai Group business-oriented services index for May fell to negative 33.3, from negative 19.6 in April, reported Ai Group.

The Ai Group business-oriented services index covers utilities, technical services, supply chain, and transport providers.

A large share of services businesses "reported shortages of skilled labour, the impact of higher interest rates, uncertainty, material costs and supply constraints," said Ai Group.

The business services trend index in May struck the lowest level since 2020, in the COVID-19 pandemic era, according to Ai Group.

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