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S&P/ASX 200 : Australia's Business Activity Reaches Two-Month Low in January Despite Strong Manufacturing Output

01/22/2021 | 04:07am
(MT Newswires) -- Private sector activity in Australia fell in January to a two-month low as the drop in activity in the services sector offset the strong growth in the country's manufacturing activity, according to the latest IHS Markit data released Friday.

The IHS Markit Flash Australia Composite Purchasing Managers' Index (PMI), which measures the activity of the country's services and manufacturing sectors, fell to 56 in January from 56.6 in December. A reading above 50 indicates an increase, while a reading under 50 points to contraction.

"The Australian private sector remained resilient at the start of the year, despite the COVID-19 pandemic, with the flash PMI showing sustained growth of new orders, output and employment. Companies suggested that sales were supported by pent-up demand, particularly in the manufacturing industry," IHS Markit's economics associate director Pollyanna De Lima said in a statement.

Australia's Services PMI fell to a two-month low of 55.8 from 57 last month as companies in the services sector recorded slower growths in new orders. Companies surveyed by IHS Markit also attributed the slow activity to border restrictions enforced amid the coronavirus pandemic.

In contrast, manufacturing PMI surged to a 49-month high of 57.2 this month compared with 55.7 in December as producers of goods witnessed the fastest growth in sales and production in over three years, despite a drop in exports as new orders from abroad fell for the fourth straight month.

Manufacturers also saw the sharpest increase in their cost burdens since IHS Markit started collecting the survey data in 2016. The rate of inflation also sped up in January from last month. Job creation was sustained in January even as some firms witnessed resignations, restructuring moves and layoffs.

Looking ahead, business confidence in Australia fell to the lowest since August 2020 as more companies were concerned over the lingering effects of the coronavirus pandemic on the economy. However, companies remained optimistic about business activity over the year ahead.

"Businesses were upbeat towards the year-ahead outlook for output, with hopes pinned on vaccine developments and the eventual lifting of restrictions globally," De Lima said.

© MT Newswires 2021
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