Australia Private Sector Shrinks for First Time in 1½ Years

The S&P Global Australia Composite PMI fell to 46.6 in March, worse than initial estimates of 47, down from 52.4 in February. This marked the first contraction in private sector activity in a year-and-a-half. The decline reflected a renewed and solid reduction in services activity, alongside a slight fall in manufacturing production. Overall new orders and output decreased, while inflationary pressures intensified, with input costs and output prices rising to 39- and 31-month highs, respectively. Despite the slowdown, employment continued to expand as firms maintained staffing levels to manage workloads. Business confidence weakened, falling to its lowest level since July 2024, amid uncertainty over economic conditions and persistent inflationary pressures.

The S&P Global Flash Australia Composite PMI fell to 47.0 in March from 52.4 in February, signaling a contraction for the first time in eighteen months as demand conditions deteriorated. Services activity entered a downturn, with the Services Business Activity Index at 46.6 in March compared with 52.8 in February, while the Manufacturing PMI slipped to 50.1 from 51.0 as both goods and services new business growth cooled and overseas orders for manufactured goods rose at the strongest pace in over three-and-a-half years. Business sentiment remained positive but weakened to its lowest since mid 2024, and employment accelerated as firms continued to hire staff albeit at a softer rate than the previous month, while outstanding workloads were depleted for the first time in 2026. Input cost pressures and selling price inflation intensified from February, with manufacturing cost rises noted as a three-and-a-half year high and charges at their highest since August 2023.

The S&P Global Australia Composite PMI fell to 52.4 in February from 55.7 in January, final data showed. The reading marked the seventeenth consecutive month of expansion and signaled another expansion in private sector output despite softening from the start of the year. This was attributed to a renewed fall in manufacturing production while services activity growth softened. In line with this, overall new orders and export orders similarly rose at slower rates in February, while optimism levels dropped. Employment expanded at a stronger pace as pressure on capacity persisted, allowing firms to address ongoing workloads. Finally, rates of inflation rose in February, driven mainly by higher services inflation. Despite the continued expansion, business confidence weakened and fell to the lowest level since September 2024.