Australia’s Service Sector Posts Third Consecutive Month of Growth
Synopsis
Australia’s service sector extends its growth streak to three months, with rising new orders and improving confidence despite sharp increases in input costs.
Key Highlights
- Services sector activity in Australia expanded for a third straight month with the PMI Business Activity Index at 53.2, maintaining expansion
- New orders increased for the second month running, although export orders fell again.
- Business confidence rose to a six-month high in August.
- Working with input prices jumped sharply due to high regulatory expenses and wage pressures.
Growth Continues Across Most Sectors
The service sector in Australia rose for the third consecutive month in August, assisted by an increase in new orders and a sustained recovery of business sentiment. For August the seasonally adjusted S&P Global Australia Services PMI Business Activity Index fell to 53.2 down from July’s 53.6 but continues to remain well above the break-even 50-point mark separating growth from contraction.
In August, activity was up in four of the five categories tracked by the index. Transport and storage saw the biggest rise, making the first advance since February. The lone exception to this was information and communication.
New orders rose, but exports continued to decline
The volume of new orders rose for the second month running, though only at a modest rate, still in line with July’s growth. But new export orders dropped again, due to high fuel prices and lower tourist arrivals. In the latest downturn, S&P Global said the rate of decline was the softest recorded during the current sequence of weakening export orders.
Demand Dips as Business Confidence Rises to Six-Month High
Service sector firms remained positive regarding growth prospects for the year ahead, reporting a strong pipeline of new business to come and plans for further expansion. Expectations were at a six-month high in August, close to pre-Middle East conflict levels.
Andrew Harker, economics director at S&P Global Market Intelligence said that although the latest expansion of business activity and new orders was solid but not particularly strong, increasing optimism and healthy demand pipelines suggest growth could be set to improve in the months ahead.
Rising Costs Remain a Concern
Input prices soared in August, with the rate of inflation accelerating from the previous month following an increase in fuel costs and cost pressures owing to wage increases. In turn, service providers increased their own prices to compensate for the higher costs.
Harker raised caution that these rising input costs might actually slow the pace of growth ahead, but for now, it seems like the third quarter is providing a decent enough print for GDP of this country.
Source: Finance Yahoo
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