Australia's service sector experienced a third consecutive month of business activity expansion in August as new orders continued on an upward trajectory and business confidence recovered further.
The seasonally adjusted S&P Global Australia Services PMI Business Activity Index posted at 53.2 in August, slightly lower than the previous month's 53.6 reading but well above the 50 mark that separates growth from contraction, the index provider said Thursday.
Four of the five general categories covered saw activity rise in August, with transport and storage posting the sharpest expansion as the sector grew for the first time since February, while information and communication was the outlier.
The growth came as new orders jumped for the second straight month, rising at a modest pace and broadly in line with the expansion recorded in July. However, new export orders fell again amid elevated fuel costs and lower tourist volumes, although the pace of the decline was the least pronounced in the current sequence of drops, S&P said.
Amid a robust pipeline of new business and expansion plans, firms in the service sector remained optimistic on business activity gaining traction over the coming 12 months. Confidence improved to a six-month high in August and was only a touch below levels seen before the Middle East conflict broke out.
"Although the latest expansions in business activity and new orders were solid but unspectacular, rising business confidence and reports of strong pipelines of new work hint at improving growth rates in the months ahead," said Andrew Harker, economics director at S&P Global Market Intelligence.
Input prices continued to increase sharply in August as the rate of inflation ticked up from the previous month due to rising fuel prices and wage pressures, prompting service providers to raise output prices accordingly.
Higher input costs could constrain the rate of expansion going forward, but for now, the third quarter appears to be providing "a decent outturn" for gross domestic product, Harker said.
