Into the Morrison Idiot recession we go. Remember that vaccines “are not a race” and we do not need to centralise hotel quarantine in the bush. Via Markit comes the crashing Aussie flash PMI:
The growth streak for the Australian private sector ended in July according to Flash PMI® data which showed business activity in contraction. Survey respondents signalled that renewed restrictions, brought about by the spread of the Delta variant of the COVID-19 virus, affected demand and output in the country. Business sentiment likewise softened in the month. That said, employment and price gauges remained in growth, albeit showing softer readings compared to June.
Plunging from 56.7 in June (final reading) to 45.2 in July, the IHS Markit Flash Australia Composite Output Index* fell to a 14-month low and pointed to the first contraction seen since August 2020. While heightened COVID-19 restrictions in Victoria had weighed on Australia’s economic performance in June, the extension of the movement restrictions to a greater number of states into July further affected overall private sector output.
Demand conditions softened significantly in July, particularly for services as order book volumes slipped into contraction.
While manufacturing new orders managed to remain in growth, anecdotal evidence suggested that the COVID-19 movement restrictions contributed to the rate of expansion easing to the slowest since last November.
With the easing of demand, private sector firms saw a drop in work outstanding. Once again, this was driven by the service sector with firms reported to have cleared some outstanding business. Manufacturers reported supply constraints contributing to the eighth consecutive month in which work outstanding rose, albeit at a slower pace.
Employment conditions remained positive, although the pace of job creation slowed sharply from June. Firms across both the service and manufacturing sectors continued to increase their operating capacity with manufacturers doing so at a survey record rate.
Price pressures meanwhile eased in July across both input prices and output charges, though both remained above their respective survey averages. Notably, manufacturing input cost inflation accelerated in July, moving against the broad trend of easing price pressures. Firms in the manufacturing sector highlighted higher costs across an assortment of categories, exacerbated by the current COVID-19 disruptions.
Overall, Australian private sector firms remained optimistic with regards to output for the coming 12 months, though the optimism eased to the lowest in just under a year.
The IHS Markit Flash Services Business Activity Index slipped to 44.2 in July, from a final reading of 56.8 in June. This marks the first service sector contraction in 11 months. July’s reading was also the lowest since May 2020.
Various Australian states experienced increased movement restrictions in July, leading to the sharp contraction of both domestic and foreign demand for services. As a result, overall business activity plunged, although employment remained in growth albeit at a much lower rate compared to June.
Input cost pressures eased marginally for firms in the service sector, but output price inflation slowed at a sharper rate, reflecting a squeeze on margins. Overall service sector optimism eased again to an 11-month low.