Australia Service PMI Jumps to Eight-Month High as Omicron Eases

(Bloomberg) -- A gauge of Australia’s services sector activity jumped to an eight-month high in February as a receding coronavirus wave helped lift demand.

The IHS Markit Flash Services Business Activity Index rose to 56.4 from 46.6 in January, marking a return to growth and the fastest expansion since June 2021. A reading above 50 indicates that activity was increasing.

The result will boost policymakers’ confidence that the hit from the omicron wave to Australia’s economy was temporary. The Reserve Bank has held interest rates at a record low of 0.1% since November 2020 but this month ceased its bond purchase program helped by a drop in unemployment and pick-up in inflation.

Monday’s data showed price pressures persisted in the services sector with selling prices rising at a survey record high. 

“While this perhaps comes as no surprise in the initial recovery phase from the latest COVID-19 wave, the lingering impact on overall inflation and wages will have to be closely followed,” said Jingyi Pan at IHS Markit. 

Still, overall optimism improved as service providers were hopeful for continued growth in demand, reflecting the short-lived nature of the omicron wave, Pan added.

The data also showed Australia’s overall private sector output and demand expanded after shrinking in January to an eight-month high of 55.9. And, the manufacturing index rose to 57.6 from 55.1 last month. 

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