Preliminary S&P Global / Judo Bank flash PMIs from Australia for July 2023. Disappointing results:
- composite flash PMI below 50.0 for the first time in half a year
From the report:
- main contributor to the soft reading for July was a dip in business activity for the services sector, which had previously been staging a recovery in 2023
- good news is that this gradual easing in activity will help take pressure off inflation and interest rates, but it will need to be sustained for the rest of 2023 and into 2024
- results also suggest that the Australian economy remains on the ‘narrow path’ for a soft landing
- economy is still growing with no signs of impending recession
- employment index fell again in July but remains in expansion above 50. Labour demand across the economy remains solid and above a level that we would typically see when output and new orders were as soft as they have been recently. This suggests that labour hoarding continues as activity slows.
- The concerning feature of the July Flash report is the price indicators which ticked higher in the month. The service sector inflation indicators remain elevated, consistent with inflation of around 4-5%, well above the RBA target of 2% to 3%. “The disinflationary trend evident in the PMI price indicators over the course of 2022 appears to have ceased. With the exception of manufactured good final prices, the inflation measures are at a level in July broadly similar to what we had at the start of 2023.
I bolded on jobs and inflation above, the twin concerns of the RBA. We have an important official inflation data reading due this week (Wednesday local time) that'll be keenly eyed for the prospects on Reserve Bank of Australia rate hike at their meeting on August 1.
11.30 am time on the 26th is:
- 0130 GMT
- 2130 US Eastern time (on the 25th)