The S&P Global Australia Services PMI Business Activity Index slipped to 48.7 in May 2026 from 50.7 in April, remaining below the 50.0 threshold that separates expansion from contraction. Although the latest reading was revised up from a preliminary estimate of 47.7, it still signaled the second decline in activity in three months.
The downturn reflected softer demand, heightened market uncertainty, and rising fuel costs associated with the ongoing conflict in the Middle East, all of which weighed on business conditions across multiple service industries. New business fell for the third consecutive month and at the fastest rate in almost two and a half years, as higher prices and elevated interest rates continued to restrain client spending.
Export orders also weakened, and firms cut staffing levels for the first time since January 2025 in response to reduced workloads. Inflationary pressures stayed pronounced: higher fuel costs pushed input prices up further, and many businesses responded by raising their selling prices to pass on part of the increased cost burden to customers.
Against this backdrop, business confidence deteriorated, dropping to its lowest level since November 2023.
