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Australia PMI February 2024

Australia: Australian service sector sees growth amid rising costs

The Judo Bank Australia Services Purchasing Managers’ Index (PMI) rose to 53.1 in February from 49.1 in January, showing an improvement in services activity since last month. As a result, the index moved above the 50.0 no-change threshold, and signaled an improvement in services sector operating conditions compared to the previous month.

The latest uptick was primarily driven by a renewed increase in new orders which, in turn, spurred business activity growth for the first time in five months. This uptick in demand conditions, marked by the fastest rise in new business since May 2022, was supported by better economic conditions. Additionally, the return to growth in new export business, particularly from clients in Asia, further bolstered this positive trend. To manage the increased workload, service providers expanded their employment levels at a quicker pace, enabling them to continue clearing backlogged work, albeit at a marginally slower pace.

On the price front, the report highlighted a significant rise in both input costs and output prices, with the rate of inflation reaching its highest point since the previous November and remaining high by historical standards. Despite these cost pressures, the overall business sentiment in the Australian service sector remained positive. Firms expressed optimism, driven by the growth in new business and the expectation of sales increases in the year ahead, although the level of confidence slightly eased from January.

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