FX.co ★ Australia Services Contract More Than Initially Expected

The S&P Global Australia Services PMI Business Activity Index declined to 46.3 in March 2026, below the preliminary estimate of 46.6 and down from 52.8 in February. This signaled the first contraction in 26 months and the sharpest downturn since November 2023, driven by weaker business activity and a fall in new orders. Firms attributed the softness primarily to turbulent international conditions and the conflict in the Middle East.

Activity contracted in four of the five monitored sectors, while new export orders declined at a solid pace, bringing an end to a seven-month period of growth. Despite the weakening in demand, employment continued to rise as firms increased staffing in anticipation of future projects, which in turn led to the first reduction in backlogs in three months.

On the price front, higher fuel costs pushed operating expenses up at the fastest pace since January 2023. Output price inflation also accelerated, reaching a 38‑month high. Although current conditions deteriorated, firms remained cautiously optimistic about future growth prospects. However, overall business confidence slipped to its lowest level in 28 months.