Australian private sector’s output slumped in March following a deterioration in demand conditions that led to lower business activity.
The Judo Bank Flash Australian Composite PMI Output Index fell from February’s 50.6 to 48.1, indicating a renewed contraction in private sector activity— the fastest decline since December 2022.
Both manufacturing and service sectors in the country saw activity decline in March, with business activity contraction occurring at a faster pace in the manufacturing industry.
Judo Bank attributed the fall to weaker demand in the Australian private sector in March as higher interest rates, still-elevated inflation, and softer economic conditions affected new business for both Australian goods and services.
Foreign demand also contracted at the end of the first quarter, which was caused by weakness in manufacturing export orders.
The Judo Bank Flash Australia Manufacturing PMI posted a 48.7 rating in March, down from February’s final reading of 50.5.
This marks the fourth consecutive month the manufacturing output index saw a contraction after new orders decreased at its fastest rate since August 2021.
Anecdotal interest rates and inflationary pressures affected client interest at the end of the first quarter.
“At this stage, it is impossible to say whether inflation will be back at the RBA’s target in a reasonable time frame or not. Of most concern is service industry input prices which remain very high by historical standards with index levels in the mid-60s, and only down modestly from the high point of a year ago,” said Warren Hogan, chief economic advisor at Judo Bank.
“This suggests that both labour costs and energy prices are inflationary and could maintain upward pressure on many prices across the Australian economy in 2023,” Hogan added.
The decline in new orders for Australian manufactured goods helped to ease supply constraints but price pressures also eased slightly as suppliers’ delivery times shortened for the first time since data collection began for the survey in May 2016.
Meanwhile, sentiment in the manufacturing sector remained positive, with businesses saying they look forward to better growth conditions in the next 12 months. However, the level of business confidence declined further and was at its lowest in almost three years.
