Latest PMI data showed the expansion in the Australian private sector economy strengthened midway through the fourth quarter as containment measures were eased further. Business activity growth accelerated in November, led again by the service sector. Inflows of new business rose further, but at a noticeably slower rate when compared to output. Business sentiment continued to improve and was the strongest for over two years as more firms anticipated further recovery momentum to boost business activity. However, operating capacity remained in surplus, partially linked to renewed jobs growth. Employment rose for the first time in ten months. On the price front, input cost inflation accelerated, contributing to a renewed rise in output charges.
The headline figure derived from the survey is the IHS Markit Flash Australia Composite Output Index, which is designed to provide timely indications of changes in output in the Australian private sector. Readings above 50.0 signal an improvement in business activity on the previous month while readings below 50.0 show deterioration. The Index is a GDP-weighted average of the IHS Markit Flash Manufacturing Output Index and the IHS Markit Flash Services Business Activity Index. Flash indices are based on around 85% of final survey responses and are intended to provide an advance indication of the final indices, published approximately one week after the flash release.
Don’t get too excited. As we know, PMIs are directional, not positional and given how far activity fell earlier in the year these levels of expansion equate to a very subdued rebound. If we were truly bouncing out of lockdowns etc then I’d expect to see PMI measures in the higher 60s.
That said, at least employment is finally expanding again:
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