Australia: Services PMI remains in expansionary territory in May
The Judo Bank Australia Services Purchasing Managers’ Index (PMI) fell to a four-month low of 52.5 in May from 53.6 in April. As a result, the index remained above the 50.0 no-change threshold, but signaled a softer improvement in services-sector business activity compared to the previous month.
In May, new business posted its fastest rise in two years, bolstered by a significant acceleration in new export business growth—particularly from clients in the U.S. and Asia. In response, firms raised their employment levels in May at the quickest clip in eight months in order to meet growing demand.
With regard to prices, input cost inflation rose to its highest level since February, driven by higher costs for input materials and transportation. As a result, service providers increased their selling prices for the first time in five months. Finally, business sentiment in the Australian service sector improved, with firms indicating optimism regarding economic conditions and their efforts to drive business growth in the coming year.
Matthew De Pasquale, economist at Judo Bank, commented:
“Despite the ongoing margin pressure, businesses continue to invest, with recent official capital expenditure data showing an improvement in core business capital expenditures through Q1 2024. Surprisingly, the pick-up in investment and new activity hasn’t corresponded with an increase in service business confidence in May, with the future activity index, a proxy for business confidence, remaining in expansion territory but stabilising well below pre-pandemic levels.”