Sydney : The positive momentum the Australian economy enjoyed in the first half of the year now looks to be reversing, and fast.
Worryingly, the slowdown is being entirely driven by the services sector, the largest employer in the country.
The Commonwealth Bank’s (CBA) “flash” Composite Purchasing Managers Index (PMI) for September, produced in conjunction with IHS Markit, dipped to 51.2 in October, the lowest level since the survey first began two-and-a-half years ago.
This PMI measures changes in activity levels across Australia’s services and manufacturing sectors from one month to the next. A reading of 50 means that activity levels were unchanged from a month earlier. The distance away from 50 indicates how quickly activity levels deteriorated or improved over that period.
The flash report — released one week ahead of the final report — captures responses from around 85% of all firms surveyed.
Based on the early responses in October, the news was not all that crash hot.
Activity levels did improve but they did so at the slowest pace in over two years, indicating a broad loss of momentum compared to what was being reported earlier in the year.
The chart below makes for somewhat ominous viewing, particularly as the movements fit with the trends seen in Australian GDP growth in the first half of the year. If that relationship is maintained, it suggests official economic growth figures may too begin to weaken quite noticeably.
