Economic Buzz: Australia?s business activity stabilises in April as services recover but manufacturing weakens

Business activity in Australia stabilised in April after declining in March, according to the latest S&P Global Flash PMI data. The Composite Output Index rose from 46.6 to 50.1, just crossing the 50.0 mark that separates growth from contraction. The improvement was driven by a recovery in the services sector, while manufacturing output fell for the third consecutive month.

Overall demand remained soft, with total new business declining for the second month in a row as geopolitical tensions and uncertainty weighed on client confidence. While domestic demand was weak, export orders increased slightly, supported by stronger sales to North America, Asia and New Zealand.

Business confidence dropped to its lowest level in almost two-and-a-half years, reflecting concerns over rising costs and uncertain demand. Despite this, employment increased at a faster pace, with firms focusing on clearing backlogs of work.

Cost pressures continued to intensify, with input prices rising for the third straight month to their highest level since August 2022. Higher fuel and shipping costs, linked to the war in the Middle East, were key drivers. These increases were partly passed on to customers, pushing selling price inflation to a three-and-a-half-year high.

The services sector returned to growth, though only modestly, even as new business volumes declined. In contrast, manufacturing output contracted at the fastest pace since the end of 2024, with weaker order books. Supply chain disruptions worsened, with delivery times lengthening to the greatest extent since July 2022, adding further pressure on costs and prices.

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