Australia's business activity continued to expand in February, albeit at a slower pace, as private sector growth eased across both manufacturing and services amid rising costs and weaker optimism, according to a survey by S&P Global released Friday.

The Flash Australia PMI Composite Output Index fell to 52 in February from 55.7 in January, marking the 17th consecutive month of growth amid softer expansions in both manufacturing and services, the report said.

A reading above the 50-point threshold indicates expansion.

The Flash Services PMI Business Activity Index fell to 52.2 in February from 56.3 in January. The Flash Manufacturing Output Index edged down to 50.7 from 51.7, while the Flash Manufacturing PMI decreased to 51.5 from 52.3.

Private sector sales continued their nineteenth consecutive monthly rise, driven by stable customer bases, new contracts, and stronger demand, even as overall new business growth eased from January's peak, per the report.

Companies remain broadly optimistic about output growth over the next year, although overall confidence eased to its lowest point in more than a year and a half amid persistent concerns about economic conditions and rising competition.

Private sector employment surged in February at its fastest pace in nearly a year, driven by strong services hiring as firms filled vacancies and expanded operations despite softer manufacturing growth, the report added.

Businesses faced a sharp rise in costs in February, with goods producers hit by higher raw material prices and service providers burdened by rising wages and electricity expenses.

Service providers drove inflation higher in February, with both cost and charge increases hitting their highest levels since September 2025, outpacing manufacturers whose output prices rose more modestly.