Introduction
Activity in Australia's manufacturing sector is facing a slowdown as the overall economy experiences a broad decline. This deceleration brings about a reduction in inflation risks, according to the latest results of the Judo Bank Australia Manufacturing Purchasing Managers Index (PMI). The PMI fell to 47.7 in November, down from 48.2 in October, marking a ninth consecutive monthly deterioration in manufacturing sector conditions.
Manufacturing Sector Conditions
The recent figure represents the lowest reading in the eight-year history of the survey, excluding periods of pandemic-related lockdowns. However, despite this decline, the data reveals that the economy is headed for a soft landing. Warren Hogan, the Chief Economic Advisor at Judo Bank, notes that while the slowdown persists, it aligns with the Reserve Bank of Australia's efforts to raise interest rates and address inflation pressures.
Impact of Economic Slowdown
The November survey indicates that manufacturers are struggling to pass on cost pressures due to the broader economic slowdown. As a result, Hogan suggests that the slowdown in manufacturing activity could be seen as positive news for the Reserve Bank of Australia. The elevated interest rates have led to weaker activity and a reduction in inflation pressures, aligning with the RBA's objectives.
Conclusion
Although concerns remain over the steep decline in new orders since September, the overall data suggests a soft landing for the economy and a significant easing of inflation pressures. This paints a relatively positive picture of the current state of affairs in Australia's manufacturing sector.
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