The index fell below 50 for the second time in three months, signaling contraction amid weaker demand and rising costs.
Australia’s services sector contracted in May as the PMI slid to 48.7 from 50.7 in April, marking the second decline in three months. New orders shrank at the fastest pace in nearly two and a half years, while employment fell for the first time since December 2024.
The downturn was driven by reduced demand, market uncertainty, and higher fuel costs linked to the Middle East conflict. Input prices surged, though output price inflation remained slightly below April’s 39-month high. Business confidence hit its lowest level since November 2023.
The Composite Output Index also dropped to 48.7, raising concerns about Australia’s growth prospects in the second quarter. Analysts warn the sector may struggle to recover without a resolution to geopolitical tensions.