Australia’s April PMI Manufacturing has dropped to a 35-month low at 48.1, down from 49.1, while PMI Services jumped to a 10-month high of 52.6, up from 48.6. The PMI Composite also reached a 10-month high at 52.2. The data reveals a growing divergence between the performance of Australia’s manufacturing and service sectors.
Warren Hogan, Chief Economic Advisor at Judo Bank, said, “Manufacturing activity remains soft, a reflection of weaker demand for goods and a gradual slowdown in construction activity in Australia. The April flash results for the services sector have bounced strongly, bringing into question the broader economic slowdown.”
Hogan dismissed the idea of a recession, stating that the results point to a lift in Australia’s economic momentum through mid-2023. However, he noted that the risk to inflation is from excess demand in the economy, putting upward pressure on domestic prices in energy, housing, and labor markets.
With the RBA Board set to meet in early May, Hogan believes the April flash PMI, strong employment outcomes in March, and a resurgence in parts of the housing market all suggest that another 25bp rate hike in May is more likely than not, depending on the March quarter CPI to be released on April 26th.
