Australia's private-sector activity experienced a notable decline in September, driven primarily by a sluggish manufacturing sector. The flash Australia composite purchasing managers index (PMI), which combines data from both the manufacturing and service sectors, decreased to 49.8 in September, a drop from 51.7 in August.
This figure falls below the critical threshold of 50.0, indicating a shift from growth to contraction. In the manufacturing sector, the flash Australia manufacturing PMI reported a significant reduction to 46.7 in September, down from 48.5 in August. This decline indicates that the health of the manufacturing sector has now deteriorated for the eighth consecutive month, marking the fastest pace of decline since May 2020.
This downward trend highlights ongoing challenges within the sector, primarily attributed to reduced demand. Additionally, September brought about the fastest decline in new orders and production within the industrial sector, a situation that hasn’t been witnessed in over 52 months. This decline raises concerns regarding sales outlooks amidst prevailing market conditions. Turning to the service sector, the flash Australia services PMI decreased to 50.6 in September from 52.5 in August, indicating continued expansion in services but at the slowest pace since July.
While new orders within the services sector experienced a slowdown, substantial backlogs allowed managers to maintain hiring, and confidence levels, although slightly diminished, remained relatively steady compared to August. Despite the easing of inflationary pressures in September, private-sector operators in Australia continued to grapple with shrinking profit margins.
While price pressures did moderate, overall margin pressures persist, with business operators feeling the need to refrain from raising prices for customers given current demand dynamics. The figures from the flash Australia composite PMI were compiled by S&P Global based on survey responses from 400 manufacturers and 400 service providers, collected between September 11 and September 18.
This comprehensive analysis underscores the significant economic challenges that Australia’s private sector faces, particularly within the manufacturing domain, as it navigates through a contraction phase amid fluctuating demand and profitability concerns..