Australia's PMI is back above 50 (which is good), but the data shows signficant upward pressure on prices (which is bad).
The S&P Global flash PMI for April 2026:
🏗️ Composite PMI was 50.1 ( ⬆️ 3.5 )
🏗️ Manufacturing PMI was 51.0 ( ⬆️ 1.2)
🏗️ Services PMI was 50.3 ( ⬆️ 4 )
🏗️ Input cost prices rose the fastest since August 2022
🏗️ Output price inflation accelerated to a two year high
🏗️ Business confidence fell to a two-and-a-half year low
🏗️ Manufacturing supplier lead times lengthened to their worst since mid-2022
This is a mixed print. The headline moving back into ex[ansionary territory (albeit only just) is an encouraging development. Especially in services, where it was well into contraction territory over the last few months.
However, the greater concern is the surge in input prices, which somewhat mirrors the post-COVID surge. Fuel and freight costs are the obvious drivers, but the pressure is now broad-based across raw materials and supply chains. These increased costs will mostly be passed on (and we can already see output prices starting to rise).
Manufacturing lead times are also starting to blow out as supply disruptions ripple around the globe and start to choke logistics networks, and that creates its own feedback loop of cost escalation.
What makes this cycle particularly dangerous for SMEs is the cost pressure arriving at the same time as consumer confidence is tanking and household are also getting smashed with increased costs. The post-COVID inflation surge was driven by increases in input costs, but it landed alongside a historic consumer spending boom. Businesses could pass on costs because customers were willing and able to pay. This time around, that doesn’t look like it will be the case, with households under much of the same pressure. This makes this crisis more dangerous for business than the last.
For the RBA this is just another brick on the mounting pile of reasons to further increase interest rates. Accelerating cost pass-through risks inflation expectations becoming unanchored. The supply side is doing the damage, but monetary policy still has to respond to where prices are heading, despite the fact that this will further weaken an already strained economy.
