The May Flash PMI makes for grim reading as Australia slumped back into contraction. The brief return to expansion in April lasted exactly one month.
For the month of May 2026:
🏭 Composite PMI fell to 47.8 (⬇️ 2.6 from 50.4)
🏭 Services activity dropped to 47.7 (⬇️ 3.0 from 50.7)
🏭 Manufacturing PMI eased to 50.2 (⬇️ 1.1 from 51.3), with the output index stuck at 48.5 for a fourth consecutive month of contraction
🏭 New orders fell at the fastest pace since September 2021
🏭 Business confidence matched its all-time low, set at the onset of COVID in March 2020
🏭 Input price inflation remained the second strongest since August 2022
This print makes for rough reading as it's a smorgasbord of bad news. New orders falling at the fastest rate in nearly four years really conveys the nervousness in the business community. While a confidence reading matching the onset of COVID is deeply concerning, given the major impacts from the Hormuz crisis are yet to fully flow through.
This print really conveys what I've been hearing in my discussions with SME business owners over the last couple of months. It's very tough out there, and there's a lot of nervousness about what happens over the next couple of months.
Unfortunately, we have a confluence of events that make trading hard. Inflation is still running hot, input costs remain high, fuel costs are high and ticking higher, while growth. consumer confidence, and consumer spending are contracting.
What everyone needs is a quick resolution to the Hormuz crisis. The longer it drags on, the tougher this is going to get.