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CCBA “Flash” PMI suggests economy kicked off 2019 on a weakish note

January 25, 2019 Financial No Comments Email Email

Up‑to‑the minute data on the economy is now available via “flash” estimates of the CBA PMI’s.  The CBA PMI surveys cover manufacturing and services, or 75% of GDP.  The ability to access 85% of survey results earlier means that reliable “flash” estimates can be published sooner.

The Flash PMI shows that the Australian economy entered 2019 on a weakish note.  The index remains above the advance/decline line but the index level of 51.5 is the lowest reading over the three‑year life of the survey.

The drivers of the January outcome were mixed.  But the divergence between the manufacturing (up) and services (down) components is worth noting.  Turns in the Manufacturing PMI tend to lead turns in the Services PMI by two months on our analysis.  

The leading new orders and employment indexes are also sending a more positive signal than the headline PMI.  And the more sentiment‑driven survey components about activity over the next year remain strongly positive.

Survey respondents have noted some genuine weakening in demand, especially on the services side of the equation.  The impact of the drought is also biting in some areas. 

Business concerns are focussed offshore.  But despite worries about trade war risks and slower global growth, export orders are holding up. 

Earlier signs of business inflation pressures have receded.  Lower fuel prices are now having a restraining influence on business input costs.  The backlog of work has edged lower, although poor supplier delivery times remain a source of inflation concern.

The net effect of these forces is spilling over into some reduction in the pace if output price rises.  The low inflation environment of 2018 is spilling over into 2019.

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