PMIs show economy contracting – 7 month low

The S&P Global composite preliminary PMI for August fell below the 50-breakeven point for the first time in 7 months. This signals that the economy is slowing, at a minimum, and could be contracting.

• The services survey moved into contractionary territory, hitting 49.6 vs. the 50.9 seen in July, notching the first contractionary reading seen since January.

• The manufacturing survey remained in expansionary territory at 54.5, but slowed from the 55.7 seen in July.

• S&P Global noted that while price pressures had eased, they remained significant. “Increasing costs of fuel, energy, labour and raw materials continue to be listed as key contributors of input price inflation, with firms in turn choosing to pass greater cost burdens to clients in the form of higher charged prices.”

• The labour market remained tight with job growth continuing, as the manufacturing and services sectors lamented labour shortages.
• The outstanding work metric declined for the second consecutive month due to slower demand.

• New orders growth was stable, hovering around the 6-month low observed in July, aided by the recovery in tourism. But respondents reported that inflationary pressures and the recent RBA interest rate hikes held sales back.