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AUSTRALIA DATA: Services Outlook Positive But Cost Inflation Picking Up Again

AUSTRALIA DATA
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The final December S&P Global composite PMI was revised up 0.3pp to 50.2, the third straight month at this level and signalling only slight growth in activity which is being driven by the services sector. The services PMI was revised up 0.4pp to 50.8 to be 0.3pp higher than November but the Q4 average eased to 50.8 from 51.1. Growth has been stuck at a lacklustre 0.2% q/q for the last three quarters, and the services PMI is suggesting that it is likely to remain weak or possibly moderate further.

  • The S&P Global services report was mixed with higher inflation and lower employment but higher demand and confidence at its highest for more than two and a half years. The improvement in sentiment was due to expected rate cuts and “greater opportunities following the Australian elections”.
  • The pickup in the December services PMI was driven by increased new business as “client interest” developed. Export orders grew for the first time in four months driven by the US and Asia.
  • Cost pressures rose for the third straight month, but remain slightly below average, due to increased material, transport and wage costs. Selling price inflation picked up too but is also below average.
  • There was marginal “job shedding” in December, the first since Covid-impacted August 2021. The shift was driven by less capacity pressures as outstanding work continued to be reduced but also difficulties finding skilled labour to replace voluntary leavers.
  • See S&P Global report here.

Australia S&P Global services PMI vs GDP q/q%

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The final December S&P Global composite PMI was revised up 0.3pp to 50.2, the third straight month at this level and signalling only slight growth in activity which is being driven by the services sector. The services PMI was revised up 0.4pp to 50.8 to be 0.3pp higher than November but the Q4 average eased to 50.8 from 51.1. Growth has been stuck at a lacklustre 0.2% q/q for the last three quarters, and the services PMI is suggesting that it is likely to remain weak or possibly moderate further.

  • The S&P Global services report was mixed with higher inflation and lower employment but higher demand and confidence at its highest for more than two and a half years. The improvement in sentiment was due to expected rate cuts and “greater opportunities following the Australian elections”.
  • The pickup in the December services PMI was driven by increased new business as “client interest” developed. Export orders grew for the first time in four months driven by the US and Asia.
  • Cost pressures rose for the third straight month, but remain slightly below average, due to increased material, transport and wage costs. Selling price inflation picked up too but is also below average.
  • There was marginal “job shedding” in December, the first since Covid-impacted August 2021. The shift was driven by less capacity pressures as outstanding work continued to be reduced but also difficulties finding skilled labour to replace voluntary leavers.
  • See S&P Global report here.

Australia S&P Global services PMI vs GDP q/q%

Keep reading...Show less