Australian business activity stabilises in June, but new orders continue to fall
Australia's composite PMI neared stabilisation at 49.8 in June, but new orders fell for a fourth straight month, signalling persistent demand weakness that may challenge RBA policy expectations.
Australian business activity showed signs of stabilisation in June, with the S&P Global composite PMI rising to 49.8 from 49.2 in May, but the details revealed persistent weakness in demand as new orders fell for a fourth consecutive month.
The near-stabilisation of the headline composite reading is unlikely to materially shift expectations for the Reserve Bank of Australia's policy path on its own. However, the confidence reading is a red flag: sentiment at its weakest since the pandemic outside of March 2020 suggests the private sector is bracing for deterioration rather than recovery, which has implications for forward consumer spending and business investment. The continued fall in new orders for a fourth consecutive month points to demand weakness that output stabilisation alone cannot mask, and the divergence between hiring and order intake is a classic late-cycle signal that employment gains may prove short-lived. On the inflation front, the easing in both input and output price pressures provides some relief, but the overall picture remains one of a sluggish economy with fading momentum. Live rates and charts on NowPrice show how the Australian dollar and bond yields are reacting to the data.
Looking ahead, traders will focus on upcoming retail sales and inflation data for further clues on the RBA's next move. The persistent decline in new orders suggests that any recovery in the second half of the year may be muted, keeping the door open for a potential rate cut if conditions deteriorate further. The RBA's next policy meeting in August will be closely watched for any shift in tone.