Australian services activity edged back into expansion in April as firms increased hiring and output, but persistent inflation driven by higher fuel costs linked to Middle East tensions continued to weigh on new orders and keep business sentiment subdued, according to a monthly survey by S&P Global released Tuesday.
The S&P Global Australia Services PMI Business Activity Index rose to 50.7 in April from 46.3 in March, signaling a return to slight expansion after a brief contraction.
Rising staffing levels helped firms expand activity despite falling orders driven by higher Middle East war-related fuel costs, with growth limited to information and communication and consumer services, while other sectors declined, per the survey.
Business activity returned to growth in April, but new orders fell for a second consecutive month at a slightly faster pace as the Middle East conflict weighed on demand, even though export orders rebounded after a sharp decline the previous month.
Higher fuel prices pushed up input costs and accelerated inflation to its fastest pace since August 2022, with over 43% of firms reporting increases and the transport and storage sector recording the sharpest rises in both input and selling prices.
Output prices in Australia's service sector rose rapidly as fuel costs were passed through to customers, marking the fastest inflation since January 2023, while employment continued to expand for the sixteenth consecutive month at a solid pace, the survey said.
Business expansion plans lifted the 12-month outlook despite subdued sentiment, while rising employment and weaker new orders led firms to clear backlogs for a second month at the fastest pace since November 2024.
The Composite Output Index rose to 50.4 in April from 46.6 in March, moving back above the 50 no-change mark and indicating a slight recovery in business activity after the previous month's decline.
Output rose in April due to services growth while manufacturing fell, as new orders declined amid strong inflation, and input and output prices increased at their fastest pace since 2022.
Staffing levels increased strongly, exceeding the rise seen in March, while business sentiment declined further to its lowest point in 22 months, the survey added.