The Judo Bank / S&P Global PMI for June 2023
Services 50.3
- prior 52.1
Composite 50.1
- prior 51.6
Flash reading is here:
And, earlier this week we had the final for manufacturing PMI:
Commentary from the report:
- There is no conclusive evidence from these survey results that the economy is on track for a sustained slowdown, although a further loss of momentum across the services sector over the second half of 2023 could eventuate as rising interest rates bite into economic activity.
- Labour demand has fallen in recent months but remains firmly in positive territory across both the services and manufacturing sectors.
- The price indicators in the PMI survey suggest that domestic services inflation will remain elevated over the second half of 2023.
- Higher services prices likely reflect rising labour and energy costs, which do not look like they are reversing anytime soon. This all points to inflation sticky at around 4-5% in 2023, still well above the RBA’s target.
- Most forecasters had been expecting to see a stronger reaction in the economy to 400bp of rate hikes over the past fourteen months. The resilience of the economy, strong labour demand and high inflation as we enter the winter months of 2023 highlight the risk that interest rates may need to rise above 5% if we are to re-establish low and stable inflation within the Australian economy by 2025.
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The final two points above point to continued rate hikes yet to come from the Reserve Bank of Australia. The Bank remained on hold yesterday, once again expressing optimism. Which has been misplaced so far.