Australia Services Contract More Than Initially Expected

The S&P Global Australia Services PMI Business Activity Index fell to 46.3 in March 2026, larger than initial estimates of a 46.6 contraction, down from 52.8 in February. This marked the first contraction in 26 months and the sharpest decline since November 2023, reflecting weaker business activity and new orders, with firms citing turbulent international conditions and the war in the Middle East as key factors. Activity fell in four of five sectors, while new export orders dropped at a solid pace, ending a seven-month growth streak. Meanwhile, employment continued to rise, as firms expanded staffing for future projects, reducing backlogs for the first time in three months. On prices, rising fuel costs pushed operating expenses to the fastest rate since January 2023, with output price inflation reaching a 38-month high. Despite the contraction, companies remained cautiously optimistic about future growth, though overall business confidence slipped to a 28-month low.

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.