Key Takeaways
- Australia's manufacturing sector experienced a contraction in October 2025, with the S&P Global Manufacturing Purchasing Managers' Index (PMI) falling to 49.7, marking its first decline after nine consecutive months of expansion.
- New orders for Australian manufactured goods saw their sharpest decline this year, coupled with weakened export demand and business confidence hitting an 11-month low.
- New Zealand's building permit approvals surged by 7.2% month-over-month in September, indicating a robust increase in future construction activity.
Australia's manufacturing sector has entered a period of contraction, according to the latest data from the S&P Global Manufacturing PMI. The final reading for October 2025 registered 49.7, a notable drop from September's 51.4, and below the critical 50-point threshold that separates expansion from contraction. This marks the first time the sector has contracted in 2025, following nine months of continuous growth.
The decline was primarily driven by a significant weakening in demand, both domestically and internationally. New orders for manufactured goods fell at their fastest pace this year, while export demand also softened. Subdued global trade conditions and client destocking were cited by manufacturers as key factors impacting performance. Business confidence among Australian manufacturers also deteriorated, reaching an 11-month low amidst ongoing trade uncertainties and softer external demand.
Despite the downturn in activity, manufacturing input prices rose at the quickest rate since April, driven by increased material and transport costs, as well as supply disruptions. However, firms reported limited ability to pass these higher costs on to consumers due to heightened market competition, leading to a moderation in selling price inflation. The Australian Dollar (AUD) saw some movement around the preliminary release of this data, with the AUD/USD pair up 0.41% to 0.6515 on October 23. The overall sentiment suggests a challenging environment for the Australian manufacturing industry and could impact the broader S&P/ASX 200 (XJO) index.
In contrast, New Zealand's construction sector showed strong momentum in September. Building permits increased by a significant 7.2% month-over-month, building on an August increase of 5.8% (revised from 6.1%). This substantial rise in approvals is a positive indicator for the country's housing market and future construction activity, as building permits are considered a leading economic indicator.
Data from Statistics New Zealand revealed that in August 2025, 3,080 new dwellings were consented, including stand-alone houses, townhouses, flats, units, apartments, and retirement village units. For the year ending August 2025, the actual number of new dwellings consented reached 34,078, representing a 1.3% increase from the previous year. While residential activity is robust, the annual value of non-residential building work consented saw a 5.4% decrease from the year ended August 2024, totaling NZ$8.7 billion. The strong residential building permit data generally signals a positive outlook for the New Zealand Dollar (NZD) and could support the S&P/NZX 50 (NZ50) index.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.