Australia Factory Activity Contracts for the 1st Time This Year

The S&P Global Australia Manufacturing PMI dropped below the 50.0 no-change mark to 49.8 in March 2026 from 51.0 in February, the first worsening in the health of the sector in five months. The reading showed that the manufacturing sector fell into contraction territory as business conditions deteriorated marginally at the end of the opening quarter. Incoming new orders from domestic sources decreased for the first time in five months, which contributed to a second successive slight fall in output. Also, employment growth reversed into a solid contraction amid a lack of capacity pressure, while inventory levels fell at the sharpest rates in months alongside a sharp drop in confidence. Meanwhile, supply conditions markedly worsened in March as the war in the Middle East led to intensifying inflationary pressures and the steepest rate of input cost inflation in three-and-a-half years.

The S&P Global Australia Manufacturing PMI fell to 50.1 in March 2026 from 51.0 in February according to flash estimates signaling a near stabilization of the sector. The moderation reflected a fractional dip in output and the first fall in new orders since July 2024 although export demand increased at the strongest pace in over three and a half years. Manufacturers noted a loss of momentum alongside the first private sector output contraction in eighteen months. Optimism about output over the next year remained positive though confidence eased to a 20 month low amid concerns about demand fragility and supply chain disruption from the Middle East war. Firms reduced their workforce with manufacturing employment recording the strongest round of job losses since October 2024 and backlogs being depleted for the first time this year. Input costs rose at the fastest pace in three and a half years while selling price inflation accelerated to its highest since August 2023.

The S&P Global Australia Manufacturing PMI was revised lower to 51 in February 2026 from a preliminary of 51.5, the lowest reading in four months, compared to 52.3 in January. The reading showed that manufacturing conditions improved at a softer pace and manufacturing sector expansion softened. Incoming new orders from both domestic and foreign sources rose at slower rates, which led to a mild contraction in output. Also, employment growth decelerated amid an absence of capacity pressure, while inventory levels fell alongside a loss of confidence. Meanwhile, supply conditions further worsened in February, though rates of inflation eased slightly since the start of the year.