Australia’s PMI data for August revealed a slight uptick in economic activity, with Manufacturing PMI rising from 47.5 to 48.7, Services PMI increasing from 50.4 to 52.2, and Composite PMI climbing from 49.9 to 51.4.
Warren Hogan, Chief Economic Advisor at Judo Bank, noted “improvement in activity indicators,” coupled with “further upward pressure on business costs,” and “weakening in final prices.” Hogan emphasized that the Australian economy continues to expand in the third quarter, with rising demand for labor being a positive sign.
Meanwhile, the final prices index dipped, indicating that Australian businesses are struggling to pass on higher costs to consumers. Hogan warned that if this trend continues, it could signal some easing of inflation pressures, but at the expense of business margins and profitability.
Hogan also expressed caution regarding the outlook for inflation, pointing out that the ongoing rise in business costs and improving economic activity—likely boosted by the tax cuts implemented in July—underscore the continued inflation risks in the economy.
He questioned the financial markets’ certainty in pricing the next move in RBA’s cash rate as a cut, stating, “There is nothing in these results that allows us to reduce the probability that the RBA may still have to raise the cash rate further before a concerted easing cycle can begin.”
