Australian Services Sector Growth Softens in December

The S&P Global Australia Services PMI Business Activity Index rose to 56.3 in January from 51.1 in December, indicating the sharpest acceleration in service sector expansion in nearly four years, according to final readings. The stronger outturn reflected a surge in services activity and new business growth, with new orders rising at the fastest pace since April 2022 amid improved domestic and overseas demand. Employment increased at a solid and faster pace as firms hired to cope with heavier workloads, though signs of labour constraints persisted and contributed to rising backlogs. Export demand strengthened, leading to a firmer increase in new export business compared with December. Business confidence, however, declined in January amid concerns over the economic outlook and competition. On the cost side, input price inflation eased despite ongoing wage and supply cost pressures, while selling price inflation also softened and fell to a two-month low.

The S&P Global Flash Australia Services PMI Business Activity Index rose to 56.0 in January from 51.1 in December, indicating a the fastest expansion since early 2022 in the service sector if confirmed. The acceleration reflected stronger services activity and quicker growth in new business as customer demand improved, while employment continued to rise as firms hired to manage workloads, though the overall pace of jobs growth softened compared to December. Export demand conditions improved alongside better external demand, contributing to stronger new work inflows. Business confidence weakened from December, reflecting heightened uncertainty despite resilient activity conditions. On the cost side, input price inflation eased from the previous month, while selling price inflation softened as service sector charge pressures moderated.

The S&P Global Australia Services PMI Business Activity Index came at 51.1 in December, down from 52.8 in November, indicating slower expansion in the service sector if confirmed, according to final readings. The moderation reflected weaker services and new business growth amid heightened competition, with new orders decelerating while employment increased at a quicker pace as firms hired to manage workloads. Export demand for services softened, producing a more modest rise in new export business than in November. Business confidence improved to its highest since June. On the cost side, input price inflation rose at a quicker rate due to higher energy, wage and material expenses, while selling price inflation picked up and rose to a three-month high.