PMI Points To Slowing Growth, Costs Still Being Passed On

The Judo Bank November final services PMI was revised down to 46 from the 46.3 preliminary estimate and 47.9 in October. This left the composite at 46.2 down from 47.6 the previous month. The Q3 average is consistent with another 0.4% q/q GDP read but the Q4 average to date is signalling that the final quarter may be softer than this. The PMIs are pointing to shrinking activity at the worst rate since the pandemic-affected Q3 2021.

• Higher wage, transport and energy costs pushed the input price measure up again in November for the third consecutive month and increased the gap with the historical average. Rising costs and the demand outlook weighed on business confidence.
• The November RBA minutes noted that businesses have the pricing power to be able to pass on higher costs to customers and Judo Bank reported that this continued but at a “quicker pace” than last month. This is likely to keep the central bank alert to upside inflation risks, although it is widely expected to leave rates on hold in December.
• Services demand for labour picked up in November despite lower new business but additional staff helped to reduce backlogs. Employment growth has been positive for over 2 years and is putting upward pressure on wages.
• The weakness in activity was driven by higher rates and deteriorating economic conditions weighing on domestic and foreign demand, according to Judo Bank.
• See Judo Bank note here.

Source: MNI - Market News/Refinitiv/Bloomberg