Australia’s service sector continued to expand in December 2024, according to the latest S&P Global Australia Services PMI data.
The seasonally adjusted Business Activity Index rose to 50.8, up from 50.5 in November, marking the 11th consecutive month of growth. While the expansion rate improved slightly, it remained modest overall.
The increase in services activity was underpinned by a faster rise in new business. Respondents attributed this to stronger client demand, with export orders also rebounding for the first time in four months. Panellists highlighted improved demand from key markets in the U.S. and Asia as driving forces behind the uptick.
Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence commented: “The final reading of Australia’s Services PMI offered better news for growth than the flash reading in signalling a stronger services sector expansion at the end of 2024. This was driven by a quicker rise in new business, with external demand notably improving for the first time in four months."
Business optimism surged to its highest level since May 2022, extending a three-month streak of rising confidence. Many firms expressed hope for improved sales in 2025, buoyed by expectations of lower interest rates and greater economic opportunities following the Australian elections.
Despite these positive indicators, employment in the service sector declined for the first time since August 2021. The reduction in staffing levels was minor, with firms citing reduced capacity pressures as outstanding work fell for the eighth consecutive month. Challenges in securing skilled labour following employee departures also contributed to the decline.
Pan noted, “Employment declined in December. This was only the second time that employment fell in the service sector since 2020."
Inflationary pressures also intensified in December, with input costs rising at the fastest pace in three months. Higher prices for materials, transportation, and wages were frequently mentioned as drivers of increased costs.
Service providers passed on some of these cost burdens to clients, leading to a faster but still moderate rise in output charges.
In China, services activity grew in December at its fastest pace in seven months, supported by strong domestic demand as the Caixin Services PMI rose to 52.2 from 51.5 in the previous month.
Meanwhile, Japan's service activity expanded for the second consecutive month, supported by robust demand and business growth, with the au Jibun Bank Services PMI rising to 50.9 in December from 50.5 in November.
