Australia’s service sector remained in solid expansion in August, though momentum eased slightly. PMI Services slipped from 53.6 in July to 53.2, while business activity rose for a third straight month. New orders increased for a second consecutive month at broadly the same pace as July, while employment also expanded for a third month. Business confidence strengthened to a six-month high, supported by healthy pipelines of new work and improving expectations for activity over the coming year.
Cost pressures remained a constraint. Input price inflation accelerated from July as firms continued to report higher fuel and wage costs, although the pace remained below April’s recent peak. Selling-price inflation moved in opposite direction, slowing from July despite higher costs. S&P Global’s Andrew Harker said growth was “sustained in the Australian service sector” and noted that rising confidence and strong pipelines “hint at improving growth rates in the months ahead.” He cautioned, however, that sharply rising input costs could limit expansion.
Broader private-sector activity also continued to grow, with PMI Composite easing from 53.2 to 52.7 while staying firmly above 50 for a third consecutive month. Expansion was concentrated in services as manufacturing output edged lower, but new orders rose across both sectors and composite export orders increased for first time in five months. Overall, August survey points to continued Q3 growth with improving confidence, while fuel and wage pressures remain main headwind to margins and activity.
Data Summary
| Indicator | August | July | Trend |
|---|---|---|---|
| PMI Services | 53.2 | 53.6 | Expansion slowed slightly |
| PMI Composite | 52.7 | 53.2 | Expansion slowed slightly |
Components
| Component | Trend |
|---|---|
| Services business activity | Rose for third straight month |
| Services new orders | Rose for second straight month |
| Services employment | Rose for third straight month, but at slower pace |
| Services new export orders | Fell for fourth straight month, least pronounced decline in sequence |
| Services backlogs | Increased for second straight month |
| Business confidence | Rose to six-month high |
| Services input prices | Inflation accelerated, driven mainly by fuel and wages |
| Services output prices | Inflation slowed from July |
| Composite new orders | Rose for second straight month |
| Composite new export orders | Increased for first time in five months |
| Composite employment | Increased again |
| Manufacturing output | Ticked lower |
Key Takeaways
- Australia PMI Services eased from 53.6 to 53.2, but remained consistent with solid expansion and marked a third consecutive monthly rise in activity.
- PMI Composite slipped from 53.2 to 52.7, with overall private-sector growth still solid but increasingly centered on services as manufacturing production edged lower.
- Services new orders increased for a second month, while business confidence climbed to a six-month high, pointing to firmer expectations for coming months.
- Employment increased again, but staffing growth slowed and backlogs rose, suggesting workloads continued to outpace capacity at some firms.
- Input cost inflation accelerated amid higher fuel and wage costs, while selling-price inflation slowed, indicating less complete cost pass-through.
- S&P Global’s Andrew Harker said strong pipelines and rising confidence “hint at improving growth rates in the months ahead,” while warning sharply rising costs could constrain expansion.
