The CBA Flash Composite PMI indicates a contraction in business activity over August. This is hardly surprising given the lockdown measures in Victoria (~24% of the national economy). The Composite PMI sits only modestly in contractionary territory (48.8) so it is highly likely that outside of Victoria private output continued to expand over the month (note that the PMI readings measure the change in business activity on the previous month with 50 being the level that separates expansion from contraction).
The fall in business activity was confined to the services sector. Activity in the manufacturing sector expanded over August to build on a decent result in July. Looking at the broader trends in the PMIs it is clear that Australia’s services sector has been far more negatively impacted from the COVID‑19 pandemic than the much smaller manufacturing sector. Lockdowns, in particular, weigh heavily on services sector output as a large number of businesses are not able to trade or can only trade in a limited capacity.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
