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Highlights
- Private sector records fastest new business growth since 2021
- Manufacturing holds positive momentum, services sector cools
- Inflationary pressures could slow anticipated rate cuts
Australia’s private sector is showing renewed signs of strength, with new business activity in April accelerating at its fastest pace in three years, according to data from S&P Global. This resurgence points to a potential shift in momentum for the broader economy, even as mixed signals emerge from key industries.
S&P Global’s Flash PMI data—collected from around 400 companies across the manufacturing and services sectors—revealed that private sector output climbed for the seventh consecutive month. The Composite Output Index remained in expansionary territory, suggesting that economic resilience is underpinning this uptick in business performance.
The Flash Manufacturing Purchasing Managers’ Index (PMI) stood at 51.7 in April, slightly down from 52.1 in March. While this indicates a marginal dip, it still marks continued expansion within the manufacturing sector, which has been buoyed by steady demand and improved operational capacity.
On the other hand, activity within the services sector softened, falling to a two-month low. This sectoral divergence reflects underlying volatility as businesses navigate shifting consumer trends and cost pressures.
One of the key takeaways from the report is the persistence of inflationary pressures. Many firms surveyed reported rising input costs, which could influence the Reserve Bank of Australia’s (RBA) future policy decisions. Market expectations around aggressive rate cuts may need to be tempered, with economic analysts cautioning that inflation may not retreat as quickly as anticipated.
This changing economic backdrop holds relevance for listed Australian companies with exposure across manufacturing and services. Companies like Xero (ASX:XRO), which cater to the services and small business sectors through digital accounting software, could be sensitive to shifts in service sector dynamics. Similarly, manufacturing-related firms such as Bluescope Steel (ASX:BSL) may benefit from sustained factory activity and infrastructure demand.
While uncertainties remain, including inflation trends and central bank actions, the private sector’s improving business conditions suggest that Australia’s economy is holding up more robustly than previously expected. As April’s data reveals, a nuanced picture is emerging—one where growth and caution walk hand in hand.
