Australia Manufacturing PMI Reaches 52.0 in July, Indicating Output Growth

The S&P Global Australia Manufacturing PMI increased to 52.0 in July from 51.5 in June, marking the fourth consecutive month above the neutral 50.0 threshold and the strongest reading since January. This rise reflects a modest improvement in manufacturing conditions, with production and new orders both returning to growth for the first time in six months.

Employment in the sector also saw a notable increase, with staffing levels rising at the fastest pace since January, although some of this hiring was temporary. However, the recovery is tempered by ongoing challenges, including a decline in new export orders, which fell again due to rising prices and competition.

Input price inflation eased to its lowest level since February, but remains elevated, with 40% of firms reporting higher costs primarily driven by fuel and shipping expenses linked to the Middle East conflict. This persistent inflationary pressure poses risks for future producer price inflation readings, which the Reserve Bank of Australia will monitor closely.

Andrew Harker, Economics Director at S&P Global Market Intelligence, noted that while the increases in output and new orders provide some reassurance, the recovery is tentative and could be short-lived if inflationary pressures re-emerge. Manufacturers expressed cautious optimism regarding their production outlook, with plans for capacity expansions continuing, albeit still below pre-conflict levels.