Australia Services Activity Expected to Contract in March

The S&P Global Flash Australia Services PMI Business Activity Index fell to 46.6 in March from 52.8 in February signaling the first contraction in over two years. The downturn reflected a solid drop in services activity and a fresh fall in new business as demand faltered while employment continued to rise but slowed to the weakest pace in four months and outstanding workloads were depleted for the first time this year. Export demand increased but was insufficient to stop a contraction in overall sales. Business confidence weakened to a 20 month low amid demand fragility and economic disruption due to the war in the Middle East. On the cost side input price inflation and selling price inflation intensified from February as service providers faced costs at a more than three year high and charges reached their highest since August 2023.

The S&P Global Australia Services PMI Business Activity Index fell to 52.8 in February from 56.3 in January, indicating a solid extension of rising services activity to just over two years, according to final readings. The slower outturn reflected an easing in activity and new business growth, with new orders rising at a slower but still strong pace underpinned by new launches and growing customer bases. Employment increased at the quickest rate in almost three years as firms hired to cope with ongoing workloads, though pressure on capacity persisted and contributed to rising backlogs. Export demand continued to improve, leading to a more modest increase in new export business compared with January. Business confidence, however, declined in February amid concerns over the economic outlook and competition. On the cost side, input price inflation intensified on the back of higher labour and utility costs, while selling price inflation also rose and climbed to a six-month high.

The S&P Global Flash Australia Services PMI Business Activity Index fell to 52.2 in February from 56.3 in January, signaling expansion but at a softer pace. The slowdown reflected weaker services activity and slower growth in new business as customer demand cooled, while employment continued to rise and accelerated to its strongest pace in nearly three years, and outstanding workloads were unchanged after rising in January. Export demand increased only marginally and contributed less to new work inflows. Business confidence weakened to its lowest in just over a year and a half amid economic and competition concerns. On the cost side input price inflation and selling price inflation intensified from January as service providers became more aggressive in price setting.