PMIs Point To Deteriorating Activity But Rising Price Pressures

The preliminary S&P Global Australian PMIs for November were not good news for the RBA with economic activity shrinking but inflation pressures building. This data really points out how narrow a path the RBA is navigating but it also signals that rate hikes are likely to continue into 2023.

• The composite PMI showed a faster contraction in activity with the index at 47.7, which was a 10-month low, compared with 49.8 last month. Both services and manufacturing PMIs deteriorated but the latter remains in growth territory at 51.5 but this was the lowest in over two years. The services PMI is at 47.2 versus 49.3 in October.
• The price components of the index were disappointing showing an increase in inflation pressures with input costs rising and both services and manufacturing firms passing them on to customers resulting in an increase in selling prices. The services selling price PMI reached a four month high.
• The weakness in the services PMI was driven by shrinking demand and new orders. Manufacturing demand continued to grow and foreign orders increased at a faster rate.
• The employment components in the survey indicated further solid jobs growth. Some survey participants also reported difficulties in finding appropriate labour.
• See the S&P Global Australia PMI report here.

Source: MNI - Market News/S&P Global/Bloomberg