Australia’s business sector experienced a significant acceleration in January, according to S&P Global’s latest flash Purchasing Managers’ Index (PMI). The composite output index surged to 55.5, a notable increase from 51.0 in December. This represents the most robust rate of expansion since August 2025, signalling a strong start to the year for the Australian economy.
The upturn was underpinned by accelerated growth in both the manufacturing and services sectors. New business orders played a crucial role, including increased overseas demand for manufactured goods. This surge in demand led to the fastest rise in export orders in three-and-a-half years. To manage the growing workload, companies increased their staffing levels, although the overall rate of employment growth moderated slightly compared to the previous month. Backlogs of work also increased for the first time in nine months.
Despite the positive growth indicators, input costs continued to rise, particularly within the manufacturing sector. However, there was some relief as the overall rates of cost and output price inflation eased from their December levels. Looking ahead, the data presented a mixed picture. While new order growth remained strong, business optimism dipped to its lowest level since October 2024, partly attributed to geopolitical uncertainties.
Jingyi Pan from S&P Global commented that the data indicates “resilient economic conditions at the start of 2026,” with balanced growth across both manufacturing and services. However, Pan also highlighted potential risks associated with increasing input costs and a decline in sentiment within the service sector, suggesting that businesses should remain vigilant in the face of these challenges.
