Aussie manufacturing conditions improve at fastest pace since 2022

S&P Global has reported that Australia’s manufacturing sector experienced its strongest improvement in nearly two-and-a-half years in March.

Rising new orders supported a renewal of production growth, and job creation also re-commenced, supporting the clearance of backlogged orders. Meanwhile, purchasing levels were raised for the first time since September 2022, contributing to a solid rise in stocks of purchases.

On the prices front, average input prices continued to rise at a steep rate in March, but output charge inflation eased despite reduced optimism regarding future output.

The headline seasonally adjusted S&P Global Australia Manufacturing Purchasing Manager’s Index (PMI) posted 52.1 in March, up from 50.4 in February. Posting above the 50.0 neutral mark for the third successive month, the latest data signalled that manufacturing sector conditions continued to improve in March. Moreover, the latest headline index was the highest seen since October 2022.

Contributing to the increase in the headline index was manufacturing production, which also expanded at the most pronounced pace since October 2022. The latest acceleration in output growth was driven by rising new business inflows and increased capacity, according to the report. Australian manufacturers reported receiving new orders at the fastest rate in 28 months. Better domestic economic conditions, marketing promotions and client restocking underpinned the growth in new work, according to panellists. However, firms reported a renewed fall in export orders, reflective of subdued external conditions.

Consequent of the rise in overall new business, Australian manufacturers hired additional staff. The rate of job creation was the strongest in two years with firms also reporting the backfilling of roles from earlier periods of job shedding. A greater volume of post-production inventory was also seen for the first time since last May, reflecting an excess of output over new order inflows. The accumulation of finished goods was also partially attributed to shipment delays. Indeed, more broadly, vendor delivery times lengthened at a more pronounced pace in March as disruptions from Cyclone Alfred added to supply and shipment constraints.

S&P Global Australia PMI: Index > 50 indicates improvement month-on-month. ©S&P Global 2025.

Australian manufacturers remained optimistic in March. Despite falling since February, the level of confidence was still the second-highest since August 2022. Firms were generally hopeful that economic conditions can improve and support sales in the next 12 months, though some were concerned about the impact of US tariffs.

Finally, on prices, average input costs rose at a pace that was steep and unchanged from February amid reports of higher raw material, transport and finance costs. The rate of selling price inflation eased since February, however, as Australian manufacturers partially absorbed cost increases in a bid to support sales as competition intensified.

“March’s manufacturing PMI data brought positive news with indications of the strongest improvement in manufacturing sector conditions in nearly two-and-a-half years,” said Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence. “The latest expansions of goods new orders and output represented a nascent recovery of the sector. That said, some forward-looking indicators brought conflicting signals regarding growth in the coming months with the level of business confidence notably having eased in March.

"Overall, it was encouraging to see the rise in demand driving the fastest rise in employment in two years. Firms were also seen willing to backfill positions that were left empty previously in anticipation of higher future production. Additionally, restocking at manufacturers [was] also observed in the latest survey period.”

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