Australia’s Judo Bank Flash Services PMI dropped to 50.5 in September, down from 52.5 in August, indicating a slowdown in growth. However, the index still marks the eighth consecutive month of expansion, showing resilience in the services sector despite challenging conditions.

The decline in the PMI signals slower growth but maintains an overall positive trajectory for Australia’s services sector. A reading above 50 indicates expansion, and September’s figure of 50.5 highlights ongoing growth, albeit at a reduced pace compared to the previous month.

New Business Inflows Drive Growth

The primary driver behind the sector’s continued expansion was higher new business inflows, particularly in consumer services. Domestic demand helped offset some of the challenges faced by service providers, keeping the sector in expansion territory.

On the downside, export demand saw a decline due to overseas budget cuts and tougher global trade conditions. This weakening in demand from international markets has put pressure on the overall growth rate for Australia’s service providers.

Job Creation Reaches New Highs

In response to rising workloads, service providers increased their hiring efforts. September saw the fastest pace of job creation since May, signaling a positive response to higher business activity despite external challenges.

Input Costs and Inflation Slow

Service providers faced rising input costs, particularly for materials, electricity, and labor. Despite this, inflation eased, leading to the slowest increase in selling prices since December 2020. This suggests that businesses are absorbing some of the rising costs, offering relief to consumers.

Conclusion

Australia’s services sector continues to grow, though at a slower pace. While domestic demand remains strong, weakened export demand and rising costs present ongoing challenges. However, the sector’s ability to maintain job creation and slow inflation offers optimism for the months ahead.