Australia’s manufacturing sector recorded faster growth in January, with manufacturing output and new orders rising at quicker paces, according to the latest Purchasing Managers’ Index data from S&P Global.
The seasonally adjusted S&P Global Australia Manufacturing Purchasing Manager’s Index (PMI) remained above the 50.0 no-change mark for a third consecutive month, signalling continued improvement in manufacturing conditions.
The index rose to 52.3 in January from 51.6 in December, which S&P Global said was the strongest reading in five months.
Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, said the data showed a clear strengthening in manufacturing activity at the start of the year.
“The Australia Manufacturing PMI indicated that business conditions in the goods producing sector improved at a faster pace in the opening month of 2026,” Pan said.
S&P Global reported that manufacturing production expanded at a quicker pace, supported by rising new work inflows.
According to Pan, “manufacturing output growth accelerated to a level matching the long-run trend, while employment and purchasing activity also increased at historically marked rates.”
The pace of overall new business growth was the fastest since August last year, supported by the first expansion in new export orders in five months. Pan said PMI sub-indices pointed to continued momentum ahead.
“PMI sub-data, including the new orders and future output indices, all pointed to the likelihood of continued output growth in the coming months,” she said, adding that this coincided with “more broad-based improvement in demand.”
In response to rising new orders, manufacturers continued to increase staffing levels in January. S&P Global said employment growth was the strongest since March 2023, allowing firms to further reduce outstanding workloads.
Purchasing activity also expanded for a third consecutive month, broadly in line with higher production requirements.
However, supply chain pressures persisted. Manufacturers reported transportation delays, port congestion and material shortages, which contributed to a further deterioration in supplier performance during the month.
Although delivery times lengthened at a less pronounced pace, S&P Global said this still resulted in delays to outbound shipments of finished goods and a renewed accumulation of post-production inventories.
Cost pressures also intensified at the start of 2026. Supply constraints and higher raw material prices led to the fastest rise in average input costs in nine months, according to the survey. Pan said that while supply conditions showed some easing, they continued to weigh on prices.
“While supply conditions deteriorated at a less pronounced pace, this contributed to another intensification of cost pressure, which in turn led to higher selling prices,” she said.
Despite rising costs, both input price inflation and output price inflation remained below their long-run averages in January.
Overall confidence across the manufacturing sector improved, with S&P Global reporting that firms were their most optimistic in nearly four years, amid expectations that economic growth and business development plans would support sales in the year ahead.
