Australia's service sector experienced a slowdown in its expansion during September, with new business growth decelerating alongside renewed challenges in the export market, as reported by S&P Global. The seasonally adjusted Australia services purchasing managers index (PMI) recorded a reading of 50.5 in September, a drop from 52.5 in August.
This figure nonetheless remains above the critical 50-mark that indicates the threshold between growth and contraction, according to insights gained from a detailed monthly survey. What the September reading highlights is the eighth consecutive month of expansion in services activity; however, the growth has been at a slower, marginal pace.
There was a notable increase in new business inflows in September, which was crucial in supporting the latest expansion in the Australian services sector. Particularly, firms within the consumer sector noted a significant surge in activity. Despite these advancements, demand from overseas clients saw a decline.
This downturn is attributed to reduced budgets and deteriorating trade conditions among international clients, which has inevitably influenced the growth trajectory of the service sector. In September, service-sector managers responded by increasing their workforce, demonstrating a proactive approach to manage workloads effectively. Although inflation has shown signs of cooling compared to previous months, there was still an increase in average input costs recorded for September.
In detail, expenses for input materials, labor, and electricity considerably affected overall costs, compelling service providers to adjust their pricing strategies. While these providers did raise prices for customers, they did so at a more moderate pace compared to earlier periods. Notably, despite the signs of cooling activity within the sector, Australian service managers conveyed optimism about the future.
They anticipated increased sales over the next 12 months driven by improved economic conditions alongside focused promotional strategies. This positivity is pivotal for the sector's outlook moving forward. Additionally, the broader Australia services PMI, which combines insights from both the manufacturing and services sectors, reported a decline to 49.6 in September from 51.7 in August, indicating movement into contraction territory.
This shift was largely influenced by a notable decline in goods production, further emphasizing the challenges that lie ahead in the Australian economic landscape..