"Input price inflation at unprecedented rate" ... I wonder if the RBA can stay on hold until 2024 as it has said time and again?
Commentary from the report:
- “Despite growth momentum easing in the Australia service sector, overall demand continued to improve at a faster rate, which was a positive sign. This signalled that economic conditions remained robust even as concerns over the new COVID-19 Omicron variant emerged.
- “Price pressures meanwhile continued to heighten with input price inflation printing a new survey record while output prices similarly rose rapidly as firms continued to pass these on to consumers. Issues of labour constraints likewise persisted. With the COVID-19 Omicron uncertainties, it will be worth watching if these trends continue.
- “Overall business confidence dropped a notch as Australian service providers expressed some concerns over growth slowing into 2022 and with lingering COVID-19 concerns. IHS Markit forecasts for Australia’s GDP to expand by 2.7% in 2022 following a 4.0% growth in 2021.”
On that first point, concern over Omicron has accelerated substantially since this survey was conducted (December 6-11). While complications from infections have remained low the headline 'cases' number being pumped out in the media is skyrocketing and getting tested is a near impossibility for many people with interminable queues and snap closures of testing centres. Staff shortages are further compounding the woes of the service sector. Let's see if the PMI holds up in January (we won't get that report until the first week oif February though).