Australia’s PMI Manufacturing remained steady at 49.6 in April, a joint 9-month high. PMI Services dropped slightly from 53.6 to 53.1, while PMI Composite decreased from 53.0 to 52.6.
Warren Hogan, Chief Economic Advisor at Judo Bank, noted that PMI remains “firmly in expansionary territory,” and pointed to growth at “around the long-term trend rate, if not a touch higher”.
However, Hogan warned that weak consumer spending will drag on growth in the first half of the year. Despite this, businesses are still hiring, with the employment index reaching a 6-month high.
Composite input price index hit a 6-month high, with service industry cost pressures rising slightly. Hogan remarked, “This does not suggest a material step down in domestic inflation pressures in Q2.”
Additionally, manufacturing input prices hit a one-year high in May, raising doubts about further deflation in domestic goods prices. This has been crucial in bringing inflation below 4% over the past year. Any increase in goods inflation, alongside high service sector inflation, poses a significant concern for RBA, which expects inflation to decrease over the next 18 months.
