Australia data - May services PMI 52.1 (prior 53.7)

Judo Bank / S&P Global Australia PMI data for May 2023, final:

Services 52.1

• preliminary was 51.8

• prior 53.7

Composite 51.5

• flash was 51.2

• prior 53

Last week we had the final manufacturing number:

• Australia final May manufacturing PMI 48.4 (prior 48.0)

From the commentary in the report, RBA outlook with the policy meeting tomorrow:

• The latest Judo Bank PMIs highlight the resilience of the Australian economy and the underlying strength of the business sector despite all the challenges of recent years. The results also point to elevated price pressures in the services sector, which are likely to keep inflation above the RBA target for the foreseeable future.
• The implication is that the RBA may not have finished increasing interest rates in 2023. Inflation over the year to April remains high at 6.8%. The economy needs to slow down substantially if inflation is to be brought under control and take pressure off the cost of living. A pick-up in the domestic services sector is not what the RBA wants to see at this point.
• We could expect to see two further rate hikes over the next 3-4 months. In the absence of a collapse in economic activity, we are unlikely to see a reduction in the RBA’s cash rate in the 2023/24 financial year.