Summary:
- Australia’s manufacturing sector remained in expansion in December, with the PMI holding at 51.6 for a second straight month.
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New orders and output continued to grow, though momentum eased amid softer foreign demand and tighter competition.
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Employment rose at the fastest pace in nine months, supported by better candidate availability and rising workloads.
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Supply conditions deteriorated sharply, with delivery times lengthening at the fastest pace since late 2024.
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Input cost inflation accelerated, driven by higher material and shipping expenses, with output prices also rising.
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Business confidence improved to a four-month high, supported by expansion plans and new product launches.
Australia’s manufacturing sector ended 2025 on a modestly positive footing, with activity continuing to expand in December despite signs of easing momentum. According to PMI data from S&P Global, growth in new orders and output was sustained, hiring strengthened, and business confidence improved, even as supply constraints and cost pressures intensified.
The seasonally adjusted Manufacturing Purchasing Managers’ Index held steady at 51.6 in December, unchanged from November and comfortably above the 50.0 threshold that separates expansion from contraction. The reading marked a second consecutive month of modest improvement in operating conditions across the sector. However, both output and new order growth slowed relative to earlier in the quarter. Firms reported that while domestic demand conditions were improving, softer market sentiment, heightened competition and weaker overseas demand limited overall growth. New export orders declined marginally for a fourth straight month, reflecting ongoing budget constraints among foreign clients.
Despite the moderation in demand growth, manufacturers increased hiring at the fastest pace in nine months. Improved labour availability supported workforce expansion, helping firms further reduce outstanding workloads. Purchasing activity also increased in response to higher production needs, though overall inventories continued to edge lower for a third consecutive month.
Supply-side pressures intensified notably in December. Delivery times lengthened at the sharpest pace in over a year due to material shortages and logistical delays, contributing to an acceleration in input cost inflation. Higher raw material and shipping expenses pushed costs up at a faster rate than in November, though inflation remained below long-term survey averages.
Manufacturers passed some of these cost increases on to customers, lifting output prices again in December. Encouragingly, business sentiment strengthened to its highest level in four months, with firms citing new product launches and expansion plans as key drivers of expected growth over the coming year
