It’s still above water, but not exactly cruising. The final numbers for 2025 suggest the Australian services sector hasn’t stalled — though it’s not moving with the same ease it did earlier in the year. The signals aren’t alarming, but they’re far from bold.
December Growth Slows, But Doesn’t Stop
According to the S&P Global Australia Services PMI, the index fell to 51.1 in December from 52.8 in November, reports Yahoo Finance. That’s still in growth territory — the 50-point mark separates expansion from contraction — but the trend clearly points to a slowdown. This deceleration reflects a broader moderation in post-COVID momentum. Activity remains on the right side of the line, but the pace is clearly weaker.
The combination of high interest rates, persistent cost pressures, and a somewhat fatigued domestic market seems to be weighing on decision-making in both business and households. Still, it’s worth noting that growth hasn’t reversed. There’s no contraction here. The engine’s on — it’s just not revving very loudly.
New Business Supported by External Demand
One interesting detail in the report is that new orders continued to rise, largely driven by export activity. Domestic demand, while still present, appears softer, with some consumer hesitation setting in as the year closed. Firms did respond by hiring — in fact, December saw the fastest job creation in the past three months. That’s not nothing. Even as activity cools, businesses are still betting on people. That in itself says something about confidence levels, even if they’re not where they were mid-year.
Costs Keep Climbing, Pressuring Margins
Input costs continued their upward march in December. Energy, wages and material expenses all contributed to rising operating costs, a challenge that many businesses have now been facing for months. Most firms passed these higher costs on through increased selling prices, although not aggressively. It’s a delicate balancing act — maintaining margins without losing price-sensitive clients — and it’s likely to remain a key tension in the first quarter of 2026.
Sentiment Improves Slightly, but Caution Remains
Business sentiment ticked up in December, reaching its highest point in six months. That said, optimism remains below historical averages, which reflects a certain nervousness about what lies ahead. Inflation may be softening, and central banks could slow rate hikes, but the outlook remains mixed. Some firms expect things to improve. Others are simply bracing for turbulence and planning accordingly.
Composite Data Signals Broader Economic Softening
The broader composite PMI, which blends manufacturing and services, also slowed — from 52.6 to 51.0. Much like the services index, it shows expansion, but only just. For now, Australia’s economy keeps moving, powered by moderate services activity and stable exports. But behind the resilience, there’s hesitation. The gears are still turning — just with a bit more resistance than before.
