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.

Print this page

Energy markets deliver a reprieve in July

Key findings

The Australian Industry Index® continued to signal weakness in July, holding steady at -29.9 (seasonally adjusted).
Pricing indicators stabilised after three months of very high scores driven by energy prices. This reflects recent easing in global energy markets, but sees energy and industrial prices remain at a structurally elevated level.
The contraction in activity and new orders stabilised in the month, but the employment indicator fell again. This reflects the lag between the initial impact of the energy crisis and its effects on employment levels.
Manufacturing remained weak, with energy-crisis exposed upstream subsectors under the greatest pressure. Construction activity is also subdued due to both energy and consumer spending pressures.
Uncertainty – particularly over energy and industrial prices – remains the greatest risk from the crisis. With global energy prices rising again in late July, uncertainty risks are increasing and likely to weigh again in August.

This report is powered by businesses like yours

Take the 1 minute survey.

One minute. No registration. Your response shapes the most-cited industry index in Australia.

July 2026

Energy crisis insights

Liaison highlights on energy crisis impacts - July 2026

The impact of the energy crisis lifted slightly in July as fuel prices continued to rise. Negative impacts persist across many aspects of business operations.

Uncertainty ((18%) intensified slightly, driven by price volatility and geopolitical developments. Businesses reported changing fuel prices and broader economic uncertainty were contributing to cautious orders and delayed investment. Customers were postponing projects, reducing orders or running inventories at very low levels in response to uncertain demand conditions.

Demand impacts (15%) were linked to cost-of-living pressures and reduced business confidence. Fuel surcharges and rising transport costs had an impact on demand as respondents reported weaker sales and increased price sensitivity. Consumer-facing businesses observed reduced orders, while industrial businesses reported slower capital investment.

Policy and regulation 11%) added to fuel-related cost pressures and uncertainty. Higher taxes, levies and government charges alongside elevated fuel and transport costs.

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%) Respondents reported shortages of skilled labour, difficulties recruiting both skilled and unskilled workers, and a lack of training pathways into some trades. Labour shortages constrained capacity, while rising wage costs added additional pressure. Some businesses highlighted difficulties accessing skilled migrant labour.

Input cost pressure (5%) eased slightly in line with more stable global energy markets in June and the first part of July. However, with global prices rising again in late July it is likely cost pressures will soon re-emerge as a leading inhibitor.

Some businesses reported difficulty recovering higher costs through pricing, particularly in highly competitive markets or from customers who were increasingly price sensitive.

Supply chain issues (4%) were a concern for a small number of businesses who reported delayed imports, shortages of specialist equipment such as trucks, availability constraints for materials and ongoing disruptions linked to global conditions.

Activity indicators

Industrial activity

The activity/sales indicator eased modestly to -34.8 in July, but remained firmly in contraction.
The employment indicator fell to -23.0 (seasonally adjusted) after volatility in the first half of 2026. In trend terms it indicated mild contraction.
The weakness in activity/sales was driven by softer customer demand, with rising costs subduing investment, however some respondents benefited from regular customers increasing orders.
Labour shortages continue to be a key challenge, with respondents struggling to fill both skilled and unskilled roles, while employment costs put pressure on hiring.

Leading indicators

The contraction in new orders eased slightly, improving by 3.7 points to -32.8 in July.
Input volumes declined by 6.1 points to -9.1, and have been mildly contractionary over the past year on a trend basis.
Commentary on new orders were mixed, with some businesses noting softer demand due to lower consumer confidence, while others reported stronger export activity and lower competition.
Some respondents reported ongoing uncertainty around future demand has led to customers scaling back volumes and running inventory levels down.

Prices and wages

Pricing indicators moved downward in July. Input prices fell by 18.9 points to 53.9, retreating from the series high in June.
Sales prices edged down slightly to 15.1, edging lower than the three previous months.
This reflects prices stabilising after a period of high volatility in the second quarter of 2026, albeit at a much higher level than prior to the crisis.
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.
Stabilising global energy markets in June and the early part of July helped ease pressures, but with global prices increasing again in the latter part of July it is likely pressures will re-emerge in August.

Australian PMI® and PCI®

The Australian PMI® (manufacturing) declined 5.7 points to -19.6.
Manufacturers reported subdued consumer demand, rising input costs and increasing regulatory compliance burdens, all of which weighed on profit margins.
The Australian PCI® (construction) fell a further 7.3 points to -40.6 in July, marking the sixth month in contraction.
Constructors reported delays in approvals, cost pressures compounding, cautious client spending, a limited pipeline of tender opportunities, and contracts nearing completion constrained business activity.

Upstream manufacturing

Upstream manufacturing indicated mixed results in July but stayed in negative territory.
The contraction in the chemicals index eased 1.3 points to -35.7. Respondents reported pressures from rising input costs, price volatility, increased import competition and reduced demand from the construction sector.
The metals index dropped 23 points to -33.5, reversing June’s brief improvement.
Some metals businesses reported sustained demand while others noted rising input costs, customer uncertainty, ongoing skill shortages and growing employment costs as key constraints.

Downstream manufacturing

The machinery & equipment indicator improved by 13.0 points to -6.0 in July, the highest result since July 2024.
Some machinery & equipment respondents reported a lift in orders from mining and defence, reduced competition and stable sales to existing customers. Others noted a slow down in orders, skills shortages and supply disruption.
Food, beverage & TCF fell by 11.1 points to -13.4 in July as input costs, particularly fuel prices, weighed on the sector.
Some respondents reported reduced orders to domestic customers, while others reported improved export orders to Europe, Asia and China.

Business-oriented services

The contraction in business-oriented services eased, rising by 4.9 points -22.6 in July.
This indicator covers utilities, technical services, and supply chain/transport providers.
Some respondents reported a pickup in activity driven by end-of-financial-year and seasonal demand leading to higher volumes of new and repeated orders.
Other respondents pointed to reduced sales activity from the construction sector, lower demand from consumer-oriented customers and higher transport costs.

Capacity utilisation

Capacity utilisation in Australian industry moved marginally upward to 74.0% in July.
In trend terms, capacity utilisation has been trending down since December 2024; this is the lowest trend result since August 2020.
Capacity utilisation was constrained by the rising cost of raw materials, fuel and freight costs, government regulation and a shortage of skilled labour.
Global economic pressures including political instability, weaker capital investment, rising land taxes and wage increases are expected to continue weighing on utilisation in the months ahead.

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.

© Australian Industry Group, 2026. This publication is copyright. Apart from any fair dealing for the purposes of private study or research permitted under applicable legislation, no part to be reproduced by any without the prior written permission of Australian Industry Group.

Disclaimer: Australian Industry Group provides information services to its members and others, including economic policy and information services. None of the information provided here is represented or implied to be legal, accounting, financial or investment advice. Australian Industry Group does not invite and does not expect any person to act or rely on any statement, opinion, representation or interference expressed or implied in this publication. Australian Industry Group accepts no responsibility for any act or omission by any person relying in whole or in part upon the contents of this publication.

www.australianindustrygroup.com.au/aii 1300 55 66 77