Australian preliminary PMIs: Manufacturing 48.0 (prior 48.0) Services 51.8 (prior 53.7)

Judo Bank / S&P Global Australia flash PMI data for May 2023

Manufacturing unchanged at 48.0

• prior 48.0

Services down to 51.8

• prior 53.7

Composite lower to 51.2

• prior 53

Commentary from the report, in brief:

• Both the output and new orders results are in expansionary territory. Over the past two months, we have seen the best readings since the middle of 2022. This brings into question whether the economic slowdown of the past year has run its course.
• Australia’s manufacturing sector continues to slow in May and is on track for a soft landing Soft landing A "soft landing" in the economy refers to a situation where economic growth slows down, but does not fall into a recession. This is often the desired outcome for policymakers, as it allows them to make adjustments to the economy without causing widespread job losses or other negative effects associated with recessions.An example of a soft landing in the economy occurred in the United States between the years of 2004 and 2006. During this time, the Federal Reserve raised interest rates to cool do A "soft landing" in the economy refers to a situation where economic growth slows down, but does not fall into a recession. This is often the desired outcome for policymakers, as it allows them to make adjustments to the economy without causing widespread job losses or other negative effects associated with recessions.An example of a soft landing in the economy occurred in the United States between the years of 2004 and 2006. During this time, the Federal Reserve raised interest rates to cool do Read this Term. This is consistent with a global manufacturing slowdown, weaker consumer goods demand and a lack of growth in construction activity across the Australian economy. “The manufacturing indicators do not signal recession. We would need to see a further marked deterioration in the manufacturing survey to be concerned about a sharper downturn.
• Far from the risk of recession, the services PMI suggests that the risk is that the Australian economy is experiencing a pick-up in activity since February.
• While better economic conditions are always welcomed, the complicating factor in 2023 is inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term. The RBA is trying to engineer a soft landing to rid the economy of inflation. But if they don’t lean hard enough on monetary policy, we could see a more stubborn inflation emerge which will ultimately require a bigger lift in interest rates.