Australia Private Sector Activity Falls Back Into Contraction

Australia’s composite PMI fell to 47.8 in May 2026 from a final 50.4 in the previous month, flash data showed, marking the second contraction in three months as services and manufacturing weakened under the prolonged Middle East conflict. Services swung back into contraction after April’s expansion, while manufacturing output declined for a fourth straight month. Total new orders dropped at the steepest pace since September 2021, underscoring softer demand amid geopolitical uncertainty. Employment also fell for the first time in 18 months, with job losses the sharpest in nearly six years. Input cost inflation accelerated to its second-highest since August 2022, driven by fuel, raw materials, and transport, while output charges rose further, though at a slower pace than costs. Business confidence slumped to a record low in the survey’s decade history, weighed down by rising costs, risk of further rate hikes, and challenging market conditions.

Australia’s S&P Global Australia Composite PMI rose to 50.4 in April 2026, better than initial estimates of 50.1, signaling a slight return to growth following a first reduction for a year-and-a-half in the previous month at 46.6. The increase in output reflected growth in services business activity, climbing to 50.7 as sustained job creation supported output, while manufacturing production declined for a third straight month amid supply disruptions and weaker demand. New orders fell for a second consecutive month, reflecting uncertainty and rising fuel costs linked to the Middle East conflict, though services exports showed slight growth. Inflationary pressures intensified sharply, with input costs surging to multi-year highs, prompting firms to raise selling prices. Employment rose overall, supported by services hiring, but manufacturing firms cut jobs. Meanwhile, business confidence weakened to its lowest in nearly two years, as concerns over costs and demand persisted.

Australia’s S&P Global Australia Composite PMI rose to 50.1 in April 2026 from a final 46.6 in March, according to flash data, signaling a marginal return to growth. There was a rebound in services activity while manufacturing output shrank at a steeper rate, as firms grappled with disruptions linked to the Middle East conflict. Export orders continued to grow, but only modestly, helped by sales to North America, Asia, and New Zealand. However, total new business fell for a second straight month amid elevated client uncertainty. Employment growth picked up, allowing firms to make inroads into backlogged work. On the cost side, input price inflation accelerated for a third month, reaching its highest since August 2022, due to rising fuel and shipping costs. Part of this pressure was passed on to customers, with output price inflation reaching a 3-1/2-year high. Finally, business sentiment weakened to its lowest level in nearly 2-1/2 years, reflecting concerns over costs and demand.