PMIs Show Rising Inflation Trends As Activity Shrinks

The preliminary Judo Bank composite index showed that activity contracted in July for the first time since March driven by weaker services performance due to higher rates. The index fell to 48.3 from 50.1 with services down to 48 from 50.3 but manufacturing rose to 49.6 from 48.2. Judo Bank believes the data continues to point to a soft landing, as it sees “no signs of impending recession”.

• News on the inflation front was not good with input costs rising to their highest in four months due to higher wages and selling prices rising in the services sector, consistent with inflation of around 4-5% according to Judo Bank. Manufacturing inflation fell to a 34-month low though.
• “The disinflationary trend evident in the PMI price indicators over the course of 2022 appears to have ceased,” notes Judo Bank’s Hogan, which is likely to mean further RBA tightening.
• Despite activity contracting in July, new orders were “broadly unchanged” after growing the previous three months but driven by services with manufacturing falling again. New export orders fell in both sectors. Business confidence dipped to its lowest since the start of the pandemic due to services pessimism.
• Employment growth remained positive but at its softest rate this year. But Judo Bank observes that it is higher than activity/orders would require suggesting that labour hoarding continues.
• See Judo Bank PMI new release here.