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Australia Services Activity Contracts in May as New Orders Fall at Fastest Rate in Almost Two and a Half Years, Says S&P

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Australia's seasonally adjusted S&P Global Services purchasing managers' index (PMI) business activity index fell below the 50 no-change mark in May, posting 48.7 from 50.7 in April, according to a Wednesday report by S&P.

Lower activity was seen in real estate and business services, transport and storage, and finance and insurance, while growth was maintained in consumer services and information and communication, it added.

The report said that new export orders decreased for the second time in three months at a "solid" pace.

Service providers signalled a solid and accelerated reduction in new business, with the latest contraction the sharpest in just under two-and-a-half years, while new business has now fallen in three successive months.

The Composite Output Index posted 48.7 in May, down from 50.4 in April, signalling a renewed fall in private sector output in Australia.

The report said the fall in output reflected the sharpest reduction in new orders since December 2023, while employment fell for the first time in 17 months, the report added.

Input costs continued to increase rapidly, with the pace of output price inflation little-changed from the 44-month high posted in April, while business confidence dropped to a two and a half year low, the report added.

"Taken alongside the contraction in manufacturing output reported by the PMI earlier in the week, the latest data suggest that the Australian economy is going to struggle to generate any growth during the second quarter of the year," said Andrew Harker, Economics Director at S&P Global Market Intelligence.

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