Australian Industry Group Australian Industry Index

Australian Industry Index

The Australian Industry Index is Australia's longest-running industry survey - the voice of Australian businesses.
Published since 1992, it draws on direct feedback from businesses across manufacturing, construction and services to give a trusted, real-time view of how Australian industry is performing.

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Datacentre boom lifts some branches of industry

Key findings

The Australian Industry Index® rose 22.7 points in August to -3.5 (seasonally adjusted), following a period of highly volatile conditions since the onset of the energy crisis.
The activity, employment, new orders and input indicators all improved this month, returning the strongest scores since the energy crisis began.
The lift was due to improved conditions in construction and business services, which both reported increased activity due to datacentre projects. Manufacturing has not benefited from this lift.
Pricing indicators diverged in August, with input prices rising but sales prices falling. This points to limited cost pass-on and mounting inflationary pressures on industrial margins.
Energy markets have stabilised but prices remain structurally elevated relative to pre-crisis levels, adding to cost pressures on industrials.

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August 2026

Energy crisis insights

Liaison highlights on energy crisis impacts - August 2026

The impact of the energy crisis remained broadly steady in August, though negative effects persist across most aspects of business operations.

Uncertainty (14%) continued to weigh on activity, driven by economic conditions and international conflict and trade disruption. Businesses reported taxation changes and the Federal budget had contributed to uncertainty emanating from the energy market. Some described difficulty forecasting demand and smoothing production in uncertain conditions.

Demand impacts (13%) remained prominent in August. Respondents reported low volumes of new orders, fewer quote requests and enquiries, and customers deferring purchasing decisions. Consumer-facing businesses noted flat or declining retail sales linked to cost-of-living pressures, while industrial businesses reported reduced capital orders. Several described customers reviewing budgets and order requirements for the new financial year, with limited forward commitment.

Input cost pressures (13%) intensified, with respondents reporting higher supplier prices, fuel levies, raw material and energy costs, and increased airfreight charges.

Rising wages in the new financial year compounded these pressures. Many reported difficulty recovering costs through pricing in competitive markets or from increasingly price-sensitive customers, with some noting higher throughput but reduced margins.

Policy and regulation (12%) added to cost and uncertainty. Businesses pointed to growing compliance requirements, certification and government approval delays, work health and safety obligations, state-based charges and the timing of superannuation payments reducing working capital.

Regulatory requirements, approval delays and policy uncertainty were seen as constraining investment, while emissions regulations affecting heavy vehicle availability limited fleet replacement and capacity expansion.

Workforce availability (9%) was a consistent constraint. Respondents cited shortages of skilled trades, difficulty sourcing and retaining staff, and competition for labour in a low-unemployment environment. Reports of employee absenteeism due to fuel disruptions seen around Easter have declined as energy supply issues have stabilised.

Supply chain issues (5%) affected a smaller group, who reported shipping delays, extended lead times for inputs, difficulty sourcing specific materials such as resin, and schedule disruption caused by delays outside their control. Competition from low-cost imports was also raised, particularly in manufacturing.

Activity indicators

Industrial activity

The activity/sales indicator rose by 31.2 points to -2.2, to be marginally contractionary in August.
The employment indicator improved by 24.9 points, returning to positive territory. This marks the first month it has been positive since February 2026 before energy crisis.
Businesses reported mixed activity levels, with some securing new contracts and data centre projects, while others experienced lower sales and decline in enquiries.
Employment conditions remained tight, with rising wage costs, labour shortages, staff turnover and difficulties retaining workers amid strong competition for employees.

Leading indicators

The contraction in new orders eased lifting by 15.9 points to -14.9 in August, from -30.8 in July.
Input volumes also recovered, increasing by 8.8 points from the previous month and to be broadly stable at 1.0.
New orders were mixed with some businesses reporting declines while others noted the improvement, supported by recently won projects and stronger-than-expected demand.
Input volumes were affected by supply chain disruptions, elevated input costs that increased customer price sensitivity, and ongoing geopolitical uncertainty.

Prices and wages

Pricing indicators diverged in August. Input prices rose 10.8 points to 68.0, while sales prices fell 13.1 points to be broadly neutral at 0.2.
The gap between the two indices widened to 67.8 points, the largest recorded in the history of the series.
The average wages indicators climbed 16.9 points in August, reflecting annual wage increases being applied in the first month of the new financial year.
The average wages index fell 9.5 points to 28.5, the lowest result since November 2024. Some businesses reported wage pressures associated with securing skilled labour.
Many businesses reported higher employment costs and strong wage competition for skilled labour, while available inputs were generally associated with increased costs.

Australian PMI® and PCI®

The Australian PMI® (Manufacturing) improved slightly in August but remained firmly negative at -16.6.
Manufacturers reported lower local demand, increasing regulatory burden, rising costs, supply chain challenges, and stronger competition from imports.
The Australian PCI® (Construction) improved from July lifting by 36.6 points in August but continued to indicate contraction at -6.9. Construction has been especially volatile over the past twelve months.
Some constructors reported improved conditions on large projects, with government-funded and datacentre work progressing. Others noted rising input, fuel and wage costs, weather disruption, and compliance and approval delays.

Upstream manufacturing

The contraction in both upstream manufacturing sectors eased in August, though both remain firmly negative.
The chemicals index improved by 22.0 points to -12.8. Respondents reported increased activity from new construction projects, others noted rising input and material costs, market uncertainty and staff shortages.
The metals index rose 15.1 points to -17.7, with improvement was concentrated in project-driven work. Some metals firms reported a seasonal lift in demand.
While energy prices have stabilised since the volatility around Easter, then remain highly elevated relative to normal levels.

Downstream manufacturing

The machinery & equipment indicator deteriorated by 7.9 points to -13.9 in August.
Lower orders, indicating customers are deferring investment decisions, alongside rising wage costs impacted businesses in the month. Others noted increased activity driven by capital investment.
Food, beverage & TCF fell 4.1 points to -19.2, the weakest sector result in August. Weaker demand from adverse weather, rising input costs and supply delays, with limited capacity to pass costs on to price-sensitive customers.

Business-oriented services

Business-oriented services improved 21.7 points to -0.2, the strongest sector result in August and the primary contributor to the aggregate recovery.
The sector covers utilities, technical services, and supply chain and transport providers.
Some respondents attributed improved demand to construction pipeline activity, particularly data centre developments, alongside stronger labour hire demand from food services clients.
Other businesses pointed to more complex funding access under the new government budget, continued difficulty sourcing and retaining staff, ongoing supply chain disruption, and intensifying competition.

Capacity utilisation

Capacity utilisation in Australian industry moved upward to 79.4% in August.
Utilisation scores trended downward last year but have started to edge up slowly since early this year.
Some respondents reported capital availability and increased new orders driven by getting large-scale projects, boosting capacity utilisation with expectations of further growth in the coming months.
Although there was some improvement, capacity utilisation remained limited for certain respondents due to rising costs, supply disruption.

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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