Australia’s private sector business activity gained momentum at the beginning of the second quarter, driven primarily by robust growth in the service sector. According to S&P Global‘s Judo Bank Flash Australia Composite PMI Output Index, private sector activity expanded for the third consecutive month in April, registering 53.6, up from 53.3 in March. This marked the quickest pace of expansion since April 2022.
In April, higher business inflows in Australia prompted the private sector’s increase in activity and employment. Australia also witnessed a decline in the rate at which output prices increased despite higher input cost inflation. This business environment maintained firms’ optimism regarding business activity and future output.
Service sector leads growth
The service sector continued to lead Australia’s expansions, with the Judo Bank Flash Australia Services PMI Business
Activity Index posting 54.2 in April, down slightly from 54.4 in March. This marked a third monthly expansion in a row, at a slower but still solid pace. New business activity growth in Australia’s service sector also accelerated at the fastest rate since May 2022 due to an improvement in demand and rising foreign new business.
Employment growth also saw an increase despite an increase in cost pressures. However, the level of confidence eased from March but remained among the highest over the past year.
“The Judo Bank PMI highlights the resilience of the business sector in Australia. The business sector continues hiring and investing even as consumers remain cautious,” stated Warren Hogan, Chief Economic Advisor at Judo Bank.
Manufacturing sector stabilizes
Australia’s manufacturing sector almost stabilized at the start of the second quarter. The Judo Bank Flash Australia Manufacturing PMI rose to 49.9 in April, up from 47.3 in March after months of decline. New orders declined at the slowest pace since last August, which led to only a marginal decline in output.
As a result, employment levels and stocks of purchases also fell at slower rates. Price pressures rose with both input cost and output price inflation rates quickening due to reports of higher raw material and currency conversion costs. “While margin pressures are still evident in both the service sector and the manufacturing industry, businesses are still succeeding at passing on higher costs to final prices,” added Hogan.
However, optimism improved in April with Australia’s business confidence rising to the joint-highest in 14 months.
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