Australia's private sector slipped back into contraction in May as output, demand, and business sentiment weakened amid persistent inflation pressures and geopolitical disruption, according to a survey by S&P Global released Thursday.
The Flash Australia PMI Composite Output Index fell to 47.8 in May from 50.4 in April, signaling a moderate contraction in activity, the report said.
A reading below the 50-point threshold indicates contraction.
The Flash Services PMI Business Activity Index fell to 47.7 in May from 50.7 in April. The Flash Manufacturing Output Index remained at 48.5, while the Flash Manufacturing PMI decreased to 50.2 from 51.3.
The downturn was broad-based, with services contracting again in May at a slower pace than in March and manufacturing falling for a fourth straight month, leaving both below long-term growth trends, per the report.
New business fell further in May, recording the steepest decline since September 2021, with both sectors seeing strong drops in orders, largely due to weaker market conditions amid increased uncertainty from the Middle East conflict.
Business sentiment in the Australian private sector declined again in May, hitting its joint-lowest level in over a decade amid concerns over rising costs, potential interest rate increases, and challenging market conditions.
Inflation pressures stayed elevated as rising fuel, raw material, and transport costs kept input price inflation high, which was the second strongest since August 2022, while output prices rose but remained below cost inflation.
Australia saw a marginal fall in private sector employment mid-second quarter for the first time in nearly 18 months, with job losses at a five-and-a-half-year high and both services and manufacturing contracting.
The Middle East conflict disrupted manufacturing supply chains, causing vessel delays, material shortages, and higher fuel costs, leading to the second-largest drop in supplier performance in nearly four years.