Early data points to a continued decline in Australian business activity in January 2020, with the latest ‘flash’ CBA Composite Purchasing Managers Index (PMI) showing a sharp fall in output across the manufacturing and services sectors. CBA Chief Economist Michael Blythe said: “The January “flash” results show the softness in the Australian economy at the end of 2019 has spilled over into the early part of 2020.”
In January 2020 the Flash Composite Output Index was down to 48.6 from 49.6, with readings below 50.0 signalling a deterioration in business activity on the previous month.
“There is some fundamental weakness in the Australian economy associated with consumer constraint, the residential construction downturn and the reluctance of business to invest. But the PMI results are also being influenced by the terrible bushfires around the country,” said Mr Blythe.
Mr Blythe said the PMI results align with earlier CBA analysis that suggests business disruption from the bushfires will see some activities delayed or deferred with flow-on to sentiment, particularly in regional areas and the tourism industry.
“At this stage the impact seems to be mainly through disruption to supply chains. Supplier delivery times have increased sharply,” said Mr Blythe.
Mr Blythe also noted: “The gloom should not be overstated however. Key leading indicators like new orders are showing a notably stronger result than the ‘headline’ PMI readings. Expectations about future business remain at encouraging levels”.
Source: CBA