Australia's service sector continued to expand in the first quarter amid robust new business and rising employment, but business confidence fell to its lowest level in nearly one and a half years, S&P Global said Wednesday.

The seasonally adjusted S&P Global Australia Services PMI Business Activity Index edged down to 52.8 in February from 56.3 in January. The index is above the 50-point mark, which separates expansion and contraction. Despite the drop, the reading reflected an extension of rising services activity for just over two years.

New business slowed slightly but maintained strong momentum in February, owing to new service launches and growing customer bases. Increasing workloads also led firms to boost staffing levels at the fastest rate in nearly three years.

Price pressures worsened due to growing demand and higher labor, electricity, and supply costs, with inflation at its highest in five months.

"The level of confidence dropped to the lowest since September 2024 as concerns over the economic outlook and rising competition intensified," S&P commented.