Business activity in Australia's private sector expanded at a faster pace in February, driven mainly by accelerating services activity growth. Overall new business also rose at a quicker rate, though export orders remained in contraction.

Higher employment levels meanwhile supported the clearance of backlogged work, but also contributed to higher costs for Australian businesses. Firms were cautious with raising selling prices, however, amid reduced optimism in February.

At 51.2 in February, up from 51.1 in January, the headline seasonally adjusted S&P Global Flash Australia PMI Composite Output Index signaled a fifth successive monthly expansion in private sector output.

While modest, the rate of expansion was the most pronounced since last August. Business activity growth was mainly observed in the service sector midway through the first quarter of 2025. Services activity expansion accelerated for a third successive month, with the latest rise attributed to greater inflows of new business.

In comparison, manufacturing output rose only fractionally, with the pace of growth decelerating from January. The latest expansion of manufacturing production was nevertheless just the second in more than two years.

Growth in business activity was driven by higher new business, which also rose at an accelerated pace in February. Turning to prices, input cost inflation climbed for a third consecutive month in February, rising to the highest rate since last September.

The uptick in new business was mainly accounted for by improvements in domestic demand as new export business declined for the sixth month in a row to reflect subdued external demand.

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