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PMIs Signal Slowing Growth But 2023 Inflation Above Target

AUSTRALIA DATA

The Judo Bank preliminary PMIs for February improved on the previous month. The composite index rose to 49.2 from 48.5, which was the fifth consecutive contraction but the rate of decline has become minimal. This was driven by the services component which improved to 49.2 from 48.6. Manufacturing is holding above the breakeven 50-level at 50.1. The PMI is pointing to a slowdown in growth but that moderation may stabilise in H1 2023 signalling a soft landing is possible.

  • Judo Bank notes that lower demand has been weighing on the private sector. While hiring has eased, it remains solid. Interest rates and economic uncertainty were cited as the main reasons for declining demand. However, there was an improvement in foreign demand with improving manufacturing export orders in line with the better recent tone on global growth.
  • There was an easing in cost and price pressures but they remained elevated at above the historical average. Input cost inflation was its lowest in 16 months and while firms were still able to pass on higher costs to customers it was at its slowest rate since late 2021. But Judo Bank note that these indicators are still signalling inflation above target this year.
  • Supplier deliveries point to a normalisation in the Australian supply chains.
  • See the press release here for details.
Australia services PMI vs GDP q/q%

Source: MNI - Market News/Refinitiv/Bloomberg

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