Australia's service sector displayed moderate expansion, while manufacturing experienced a setback in December, contributing to a sluggish overall performance. The flash composite purchasing manager index (PMI), which encompasses both manufacturing and service sectors, decreased to 49.9 in December from 50.2 in November, falling below the crucial 50-mark that delineates growth from contraction.
Business activity within Australia's private sector saw a slight decline in the final month of 2024, primarily driven by a downturn in manufacturing production. The flash Australia services PMI decreased slightly to 50.4 in December from 50.5 in the preceding month. In contrast, the flash Australia manufacturing PMI fell to 48.2 in December, down from 49.2 in November.
The December PMI figures indicated a softening of business conditions towards the end of the year. Importantly, the slowdown in the smaller goods-producing sector was complemented by a notable deceleration in services activity growth. Faced with weakening demand during December, Australian businesses reduced their workforce for the first time in over three years.
Additionally, backlogs of work diminished in December, reflecting a lack of pressure on business capacity. As a result of this capacity easing, businesses lowered staffing levels, marking the first decline in employment since August 2021. Despite the challenges posed by soft demand, Australian business managers exhibited a greater sense of optimism in December compared to previous months, although their confidence remained below long-term averages.
Notably, the level of optimism recorded was the highest since May 2022. The flash Australia PMI was derived from surveys distributed to 400 manufacturers and 400 service providers from December 5 to December 12..