In July, private sector business activity in Australia approached stagnation as new order volumes continued their downward trend, according to recent data from S&P Global. The flash Australia composite purchasing manager's index (PMI), which combines both the manufacturing and service sectors, recorded a value of 50.2, sliding from 50.7 in June.
This figure remains just above the critical threshold of 50, which delineates growth from contraction, highlighting the precarious situation of the economy. The detailed analysis reveals that the services PMI business activity index also fell, reaching 50.8 in July, down from 51.2 in the previous month.
In a more concerning development, the flash manufacturing PMI showed a reading of 47.4, a slight improvement from 47.2 in June but still well within the contraction zone. This trend indicates that the manufacturing sector has been facing deteriorating business conditions for six consecutive months, as reported by S&P Global. The slowdown in the Australian economy has prompted a decline in new factory orders, a situation exacerbated by a significant reduction in export orders.
Consequently, many factory managers are resorting to payroll cuts as they navigate through these unsteady waters. Interestingly, inflation within Australia's industrial sector has shown signs of easing during July. This applies to both input prices and charges passed on to customers, according to S&P Global's findings.
Manufacturers have pointed out disruptions in supply chains, partially attributed to logistical challenges in the Red Sea and congestion at ports in Singapore. On a more positive note, the service sector has witnessed some payroll growth as managers have sought to alleviate backlog challenges. Additionally, compliance with a mandated increase in the national minimum wage has raised operational costs, as noted in the report. However, the sentiment among service-sector managers regarding the 12-month outlook has reached its lowest point since the onset of the COVID-19 pandemic in 2020, indicating rising concerns about future business conditions.
Overall, private-sector hiring trends in Australia have been lackluster in 2024, as highlighted by S&P Global. Official employment statistics reveal that the bulk of job creation in Australia over the past year has originated from the public sector and its related industries, while employment trends in market sectors have been experiencing a swift decline in 2024. The flash Australia Composite PMI data is derived from a survey involving 400 manufacturers and 400 service providers, providing a critical snapshot of the current economic landscape in Australia..