Australia Services Growth Falls to Seven-Month Low

The S&P Global Australia Services PMI Business Activity Index fell to 48.5 in October 2026 from 51.9 in September, marking a seven-month low and slipping below the 50.0 neutral threshold for the first time since May. Still, the index came above estimates of 47.8. Slower new business growth and operational constraints contributed to the contraction. Nevertheless, total new business continued to increase, supported by foreign demand amid stronger overseas interest and rising tourism activity. Service providers also resumed hiring after cutting staff at the end of the third quarter. Meanwhile, higher fuel, freight, labour and operating costs drove input price inflation to a five-month high. Output prices also increased at their fastest pace in three months, exceeding the long-run survey average. Despite mounting cost pressures and weaker activity, business sentiment remained positive, with firms anticipating new projects and growth initiatives to boost sales over the coming year.

The S&P Global Australia Services PMI Business Activity Index eased to 47.8 in October 2026 from 51.9 in September, marking the first contraction since May, flash data showed. It was the lowest reading since March, though new business remained in growth, with the rate of expansion clearly slowing. A slowdown in services new business growth came amid weakening demand, driven by a lack of market confidence, rising borrowing costs, and general inflationary pressures at the start of the fourth quarter. Employment increased after firms shed staff in September to cope with outstanding workloads, which had continued to accumulate. On the price front, input cost inflation accelerated due to higher energy, shipping, commodity, and wage costs. As a result, output costs rose as firms opted to pass on their increased cost burdens to clients. Finally, business sentiment remained positive.

The S&P Global Australia Services PMI Business Activity Index eased to 51.9 in September 2026 from 53.2 in August, but came above the preliminary estimate of 51.4. This marked a fourth straight month of expansion, although growth slowed to its weakest pace in three months as new business increased at the softest rate in the three-month growth sequence. Export business improved, with overseas demand rising for the first time in five months, albeit marginally. Employment fell for the first time since May as firms cited softer new orders and efforts to limit costs, while backlogs increased for a third consecutive month. On prices, input-cost inflation accelerated due to higher fuel, labour and other input expenses, while output price inflation also picked up as firms passed higher costs on to clients. Both measures remained above their respective long-run averages. Business confidence fell to a three-month low, with some firms expressing concerns over the economic outlook and sales.