Economic Buzz: Australia Services Sector Falls Into Contraction In July

Economic Buzz: Australia Services Sector Falls Into Contraction In July

Jul 23, 2021 09:07 IST capital market

The growth streak for the Australian private sector ended in July according to Flash PMI data which showed business activity in contraction, the latest survey from Markit Economics revealed on Friday. Survey respondents signalled that renewed restrictions, brought about by the spread of the Delta variant of the COVID-19 virus, affected demand and output in the country. Business sentiment likewise softened in the month. That said, employment and price gauges remained in growth, albeit showing softer readings compared to June.

Plunging from 56.7 in June (final reading) to 45.2 in July, the IHS Markit Flash Australia Composite Output Index fell to a 14-month low and pointed to the first contraction seen since August 2020. While heightened COVID-19 restrictions in Victoria had weighed on Australias economic performance in June, the extension of the movement restrictions to a greater number of states into July further affected overall private sector output.

Demand conditions softened significantly in July, particularly for services as order book volumes slipped into contraction. While manufacturing new orders managed to remain in growth, anecdotal evidence suggested that the COVID-19 movement restrictions contributed to the rate of expansion easing to the slowest since last November

The IHS Markit Flash Services Business Activity Index slipped to 44.2 in July, from a final reading of 56.8 in June. This marks the first service sector contraction in 11 months. Julys reading was also the lowest since May 2020. The IHS Markit Flash Manufacturing PMI fell to 56.8 in July from a final reading of 58.6 in June.

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