Australia’s private sector slipped into contraction in March as PMI data signaled a sharp deterioration in activity. PMI Manufacturing edged down from 51.0 to 50.1. But the real drag came from services, where PMI Services plunged from 52.8 to 46.6. As a result, PMI Composite dropped from 52.4 to 47.0, marking its weakest level since December 2023.
The data highlight a clear loss of momentum in demand, particularly across the services sector. According to S&P Global’s Eleanor Dennison, business activity contracted for the first time in a year-and-a-half, reflecting a fresh drop in demand for both services and manufactured goods. The deterioration in sentiment suggests that firms are becoming more cautious as external conditions worsen.
At the same time, inflation pressures are intensifying. Input costs rose sharply, with composite cost inflation hitting its highest level in over three years, while output charges climbed to their strongest since August 2023.
Dennison noted that the figures offer an early indication of how the Middle East conflict is feeding through to the global economy, with Australian firms facing rising costs, supply chain disruptions, and weakening demand—pointing to emerging stagflation dynamics.
