Australia’s private sector growth has hit a bit of a rough patch. After a promising start to the year, figures for February show that things are slowing down in both the manufacturing and service sectors. While still technically in expansion, the growth rate has weakened, which is causing some concern for the economy. Here’s a breakdown of what happened and what it means for the months ahead.
A Mixed Picture for the Private Sector
February’s figures, released by S&P Global, show that the country’s private sector growth slid from 55.7 in January to 52 in February on the seasonally adjusted PMI Composite Output Index. While this still indicates expansion (anything above 50 signals growth), the slowdown is noticeable. The manufacturing sector has especially been struggling, with growth lagging behind expectations. For instance, export business saw some improvement, but the pace in manufacturing has been slower compared to services.
The good news is that the services sector still seems to be doing better than manufacturing. In fact, the S&P Global Services PMI Business Activity Index jumped from 51.1 in January to 56.3 in February, suggesting that demand—both domestically and internationally—remained strong. This is a sign that consumer-facing industries are still seeing solid growth, even though there are headwinds in other areas.
Why the Slowdown?
The reasons for the slowdown are multifaceted. One major factor is a decrease in business sentiment, which has fallen to its weakest in over six months. This is partly due to heightened competition and economic uncertainty, which is making companies more cautious about expanding. Another contributing factor could be inflationary pressures, which have continued to creep up. According to the Melbourne Institute Survey, inflation expectations for February rose to 5%, higher than the official forecast of 3.8% for December 2025.
This could weigh heavily on businesses, especially as the Reserve Bank of Australia (RBA) recently hiked interest rates, leaving many concerned about potential further increases.
Is the Growth Sustainable?
Although the slowdown is concerning, it’s important to remember that growth is still happening—it’s just less robust than it was earlier in the year. The overall story remains consistent: the services sector is holding strong, while manufacturing faces a more difficult environment. Whether or not these trends will continue depends largely on how inflation and interest rates play out in the coming months.
For businesses, this means staying alert. While growth continues, the path forward could be bumpy. Inflation and high competition could hurt profitability, particularly in manufacturing and export sectors. However, if services continue to hold steady, Australia’s economy could maintain some level of resilience.








