Australian Industry Group Australian Industry Index

Australian Industry Index

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Energy costs pass-on begins in industry

Key findings

The Australian Industry Index® rebounded by 9.8 points in April but remained strongly negative at -24.4 in April.
There was some stabilisation in April, with activity, employment and new orders indicators recovering a small amount of the falls in April
Pricing pressures continue to accumulate, as fuel prices rises begin to be passed on along supply chains. Fuel levies on transport services were the primary vector of inflationary pressure in April.
Manufacturing weakened again in April while construction saw slight recovery, but both remain in contraction. Both struggle with fixed price contracts which constrain fuel cost pass-on.
Energy crisis impacts are expected to broaden from fuels and transport to other industrial materials in coming months as oil and gas shortages work through supply chains.

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April 2026

Energy crisis insights

Liaison highlights on energy crisis impacts - April 2026

Rising input costs (33%) were the dominant factor impacting businesses in April, with around one third reporting sharp increases in fuel, freight and raw materials, including plastics, packaging, metals and agricultural inputs. Fuel price escalation was widely reported across April, with flow on effects evident through fuel levies, surcharges and higher costs for transport services.

Many firms reported limited ability to pass these costs on due to fixed price contracts and/or weak demand conditions, placing margins under sustained pressure.

Uncertainty (24%) remained elevated, driven by volatility in fuel prices, freight availability and geopolitical developments in the Middle East. Businesses reported heightened caution, with delays to investment decisions, postponed procurements and hesitation from larger customers, reflecting low confidence and risk aversion.

Demand (20%) was impacted by higher fuel costs and related freight charges. Reduced customer spending led to delayed orders, particularly where costs could not be absorbed or passed on.

Supply chain issues affected 19% of businesses reporting freight delays, longer lead times and reduced transport availability. Firms reliant on interstate or imported inputs cited higher shipping costs, limited trucking capacity and delays linked to fuel availability, particularly affecting plastics, resins, packaging and construction materials. Some suppliers passed through sharp price increases, while others reduced reliability or availability of supply.

Cash flow pressures affected 10% of businesses who reported absorbing cost increases for extended periods to maintain customer relationships, while others delayed planned price rises.

Workforce pressures (8%) persisted as rising fuel and travel costs added to employment expenses and constrained workforce participation, particularly in regional areas. Some employers are looking to alternatives to workforce participation costs such as compressed weeks and WFH where suitable.

Activity indicators

Industry activity

In April, the contraction in the activity/sales indicator eased slightly at -31.2 but still signaling a reversal of early 2026 gains.
The employment indicator modestly improved but remained in contractionary territory at -25.2.
Activity and sales softened overall as uncertainty, rising costs, and a pullback in customer spending weighed on demand, with limited pockets of resilience.
Labour shortages continued alongside rising wage costs, as firms struggled to attract skilled workers and remained cautious about hiring amid ongoing uncertainty.

Leading indicators

After a sharp contraction in March, the new orders indicator recovered slightly in April, rising by 7.7 points to -24.8.
Input volumes rose modestly in April, increasing by 6.6 points to -5.5, signalling a brief period of stability following the fuel shortage shock.
New orders weakened as disruptions and cost pressures drove delays and cancellations, with only limited demand providing any offset.
Businesses continued to face constraints on input volumes due to higher fuel and raw material costs and freight delays, despite efforts to secure essential stock.

Prices and wages

All pricing indicators moved upward in April.
Input prices rose sharply, increasing by 13.5 points to 69.3, the highest level since November 2022, reflecting ongoing cost pressures, including higher fuel costs evident across March and April.
Sales prices and wages continued to rise, reaching 23.1 and 36.2 respectively.
The widening gap between input and sales price indicators (46.2 points) suggests businesses have limited ability to pass rising input costs on to customers, placing pressure on margins.

Australian PMI® and PCI®

The Australian PMI® deteriorated further in April falling to -27.9.
Manufacturers are facing pressure from fixed price contracts that cannot absorb rising input costs, alongside export disruptions, hesitant ordering, and delayed shipments, leading to production cutbacks.
The Australian PCI® rebounded sharply in April, rising by 37.8 points to -19.3, but remained in contraction.
Construction firms reported ongoing demand but highlighted rising input and staff costs, limited risk appetite, and labour shortages as skilled trades were in higher demand across sectors.

Upstream manufacturing

Upstream manufacturing indicators diverged in April. The decline in chemicals ease, while minerals and metals fell to the lowest reading in the history of the series.
The contraction in the chemicals sub-index eased by 8.5 points to -18.1, while the minerals and metals sector fell by 6.8 points to -30.2.
Some chemical manufacturers reported demand being brought forward; however, others reported reticent low customer confidence, supply disruptions, and rising energy costs tempered demand.
Metals manufacturers reported lower export demand, customers delaying orders, raw material shortages, and persistent skilled labour shortages.

Downstream manufacturing

The contraction in the machinery & equipment index increased by 3.1 points to -26.0.
Some machinery and equipment manufacturers reported sustained demand however, others noted raw material price increases as well as pressures from fuel prices and customer uncertainty.
The contraction in Food, beverages & TCF eased by 19.0 points, to -14.4.
Food and beverage manufacturers reported higher input costs to raw materials, packaging and transport costs. Some reported an inability to pass through increases added pressure to margins.

Business-oriented services

The contraction in business services continued at almost the same pace in April (-19.6) as March.
This indicator covers utilities, technical services, and supply chain/transport providers.
A high proportion of business oriented services reported adverse effects on customer demand from increased fuel costs, and supply disruption, as customers delayed orders and considered alternatives.
Some businesses reported an increase in customers building inventories.

Capacity utilisation

Capacity utilisation in Australian industry moved upwards to 77.7% in April.
Utilisation has been trending lower since the start of the year and has now fallen below the 77-82% average range maintained since mid 2020.
Capacity utilisation was constrained by skilled labour shortages, rising energy costs, supply chain disruptions and growing competition from online and overseas for suppliers.
Persistent geopolitical tensions, uncertainty around fuel supply and higher fuel prices are expected to continue to impact utilisation in upcoming months.

About the Australian Industry Index

The Australian Industry Index is a monthly index that measures changes in activity in Australia’s industrial sectors. It provides diffusion indices which measure rates of changes in the level of industrial activity – expansion, stability or contraction. A positive reading indicates the activity is expanding; negative indicates contraction. The distance from 0 indicates the strength of the expansion or decline.

The Australian Industry Index is based on monthly surveys from a national sample of Australian businesses. It uses ANZSIC industry codes for classifying sectors, and weights survey results using ABS data on gross value added by sector. Seasonal adjustment and trend calculations follow ABS methodology. Read more on our detailed methodology.

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