Q1 2026 Manufacturing Health Index

The first quarter of 2026 was marked by a sharp contraction in average sales revenue and a major liquidation of stock. Manufacturers in all territories responded to the blockade in the Strait of Hormuz - and subsequent freight surcharges - by reducing or delaying purchase orders and shedding safety stock to maintain cash liquidity.  

Percentage changes in the data below indicate the year-on-year shift compared to the Q1 2025 baseline. 

A secondary effect of the crisis is the rapid shedding of inventory. Stock on Hand (SOH) values in Australia and New Zealand have decreased by 56.8% and 52.8% respectively. This suggests that manufacturers are running down safety stock and reducing new purchasing in the hope that the conflict will resolve quickly – and to avoid replenishing during a logistics price spike. 

While the quarterly average lead times settled between 13 and 16 days, these figures are trailing indicators. Because the blockade occurred in the final month of the quarter, the mandatory 10–14 day detour around the Cape of Good Hope required to avoid the Strait of Hormuz is only beginning to show in the data. Manufacturers currently holding the record-low inventory levels seen in the SOH benchmarks face a high risk of stockouts in Q2 if these transit delays become the new operational standard. 

United Kingdom: Food Resilience vs. Construction Decline 

The UK market saw an average revenue decline of 38.7% compared to Q4 2025. However, performance was split sharply by sector:

• Food Manufacturing: Remained a rare growth outlier, with revenue increasing 20.3% year-on-year to £375,299.
• Building & Construction: Recorded a catastrophic downturn, with average revenues falling to £209,662. The combination of high interest rates and increased material costs has stalled new project starts across the region.
• Beverage Margins: The sector recorded the most severe margin compression in the study, falling to 22.2%.

Australia: Accelerated Inventory Liquidation 

Australian manufacturers recorded the most aggressive reduction in inventory. Stock on Hand  values fell by 56.8% year-on-year to an average of $207,501.

• Capital Preservation: This reduction indicates a move away from the higher safety-stock levels held in 2025. Firms are liquidating inventory to preserve cash as the Hormuz crisis increases the cost of imported raw materials and components. 
• Revenue Impact: Average sales revenue fell to $356,410, a 44.2% decrease from the Q1 2025 baseline.

New Zealand: Patches of Margin Protection Amidst Revenue Decline 

New Zealand recorded the steepest revenue decline in the study, with average quarterly sales falling 47.2% YoY to $129,653. Despite this, specific sectors demonstrated pricing discipline:

• Food Sector Profitability: NZ Food manufacturers successfully defended margins, raising them from 26.5% to 30.4% over the last 12 months. This indicates a successful pass-through of rising input costs to end consumers. 
• Inventory Levels: SOH values were reduced by 52.8% to $123,626.