Australian manufacturing conditions deteriorated in September, with activity slipping below the 50.0 no-change mark as weaker new orders led to lower output, according to S&P Global.
The seasonally adjusted S&P Global Australia Manufacturing Purchasing Managers’ Index (PMI) fell to 49.6 in September, down from 52.0 in August. The latest reading indicated a marginal deterioration in the health of the manufacturing sector and was the sharpest decline in 21 months.
S&P Global said a renewed decline in new orders contributed to the downturn, with survey respondents citing intense competition, rising prices and weaker underlying demand. New export orders also contracted after increasing in August.
The fall in new work led Australian manufacturers to reduce output at a faster rate in September. The rate of contraction was the strongest since December 2024 and marked the second consecutive month of declining manufacturing output.
Employment also fell during the month, with job shedding resuming after five months of growth. S&P Global said survey responses attributed the decline to resignations and redundancies, while backlogged orders continued to fall, extending the period of declining outstanding work to 17 months.
Manufacturers also reduced purchasing activity in September as new business and production weakened. At the same time, stocks of finished goods increased for the first time in eight months, which S&P Global said reflected a lack of demand and delays in outbound shipments.
Supply conditions also worsened during the month. Supplier delivery times lengthened further, with companies reporting disruptions to international shipments linked to the war in the Middle East, as well as severe weather disruptions around North Asia.
These disruptions contributed to higher input costs, particularly for raw materials, oil and transport. While the rate of input price inflation eased slightly from August, manufacturers continued to face elevated cost pressures.
“Despite an easing of inflationary pressures in September, goods producers in Australia continued to face elevated cost burdens,” said Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence.
Pan said the latest data pointed to renewed deterioration in manufacturing conditions, with weaker new orders contributing to lower output and reduced purchasing activity.
“Employment trends will also be worth monitoring following the first fall in manufacturing headcounts in five months, especially as confidence also declined in September,” she said.
Despite the weaker conditions, Australian manufacturers remained positive about production over the next 12 months. S&P Global said firms expected business development plans and new product introductions to support sales, although confidence fell to a four-month low following the decline in new orders.
