The pickup in the composite output index to 52.6 from 50.4 signals a second straight month of expansion and the strongest reading since the start of the year, driven almost entirely by services rather than manufacturing. The return to new order growth after four months of decline, together with the fastest hiring since April, points to a private sector regaining some momentum even as confidence remains near a two and a half year low. Easing cost pressures give the Reserve Bank some room, though a weaker export performance and persistent business caution suggest the recovery is domestically led and not yet broad based. Traders are likely to read this as modestly supportive for the Australian dollar without shifting the near term rate outlook.---Yesterday we had on OK jobs report from Australia:Australian June 2026 jobs report: Unemployment rate 4.4% (expected 4.4%, prior 4.4%)---Australian businesses are seeing renewed demand and softer costs, but confidence is recovering only slowly from multi year lows.Summary:Flash Australia Composite PMI Output Index rose to 52.6 in July from 50.4 in June, the strongest reading since the start of the yearFlash Services PMI Business Activity Index climbed to 53.0 from 50.5, the fastest services growth since JanuaryFlash Manufacturing PMI edged up to 51.7 from 51.5, while the Manufacturing PMI Output Index rose to 49.9 from 49.5New business increased for the first time in five months, ending a four month run of decline, though export sales fell more sharplyJob creation was the strongest since April, with hiring up across both services and manufacturingInput cost inflation eased to its softest pace since February, while output price inflation ticked higher since June but remained below April and May levelsBusiness confidence rose only slightly from June's more than two and a half year lowAustralia's private sector picked up further momentum in July, with the flash composite output index rising to 52.6 from 50.4 in June, according to data from S&P Global. The reading marks a second consecutive month of expansion and the strongest since the start of the year, with growth running ahead of the series average.The improvement was concentrated in services, where the business activity index rose to 53.0 from 50.5, the fastest pace of growth since January. Manufacturing was comparatively subdued, with the headline manufacturing PMI edging up to 51.7 from 51.5 and the manufacturing output index rising to 49.9 from 49.5, still shy of the 50 growth threshold but the best outcome since the start of 2026.A notable feature of the survey was the return of new business growth, ending a four month run of decline that S&P Global said was the longest since the start of 2024. The expansion in new work was broad based across both monitored sectors, with panellists citing improved demand conditions, a slight lift in market confidence and new client wins. International demand remained a weak spot, however, with export sales falling at a steeper rate than in June. Backlogs of work rose for the first time in five months, encouraging firms to step up hiring, which climbed at its strongest pace since April across both services and manufacturing.On prices, cost inflation slowed to its softest rate since February, easing further from an April peak, though outlays on fuel, oil, raw materials and wages were still widely cited as pressures. Manufacturers raised selling prices at a softer rate than in June, while stronger services demand encouraged more assertive price setting among service providers, lifting the composite rate of charge inflation from June's level, albeit still below the highs seen in April and May.Eleanor Dennison, economist at S&P Global Market Intelligence, said the data would provide some comfort that conditions are moving in the right direction, noting demand has shown signs of recovery for the first time in five months and that the private sector was being boosted by domestic demand given a deeper fall in international sales. She added that output growth remained solely supported by services, with manufacturing showing only greater stabilisation, and that softer cost pressures alongside more stable demand had encouraged firms to protect their margins more actively. Even so, she cautioned that businesses remain wary heading into the second half of the year, with confidence up only slightly from June's more than two and a half year low and growth expectations for the coming 12 months still clouded by uncertainty. This article was written by Eamonn Sheridan at investinglive.com.