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    Australian economic numbers have been notable mainly for their sparsity this week, perhaps to compensate for a surfeit of headline news since the last update. We’ve seen yet more twists in the increasingly improbable plot line for the US presidential election, one of the biggest-ever global IT outages, surprise rate cuts from the People’s Bank of China, arriving right after last week’s Communist Party Third Plenum and a dose of US financial market turbulence. The data delivered a rebound in the weekly measure of consumer confidence, along with a soft PMI result for July. In the absence of any major releases, domestic attention has instead remained focused on next week’s Q2:2024 Consumer Price Index (CPI) release and implications for the RBA’s 5-6 August Board Meeting.


    The consensus forecast for next Wednesday’s inflation numbers was unavailable at the time of writing. But according to the predictions of economists at some of Australia’s largest banks, headline annual CPI inflation in the June quarter is likely to print between 3.7 and 3.9 per cent, while trimmed mean inflation is expected to run at either 3.9 or four per cent. Those forecasts are close to the RBA’s May 2024 projections for 3.8 per cent outcomes for both inflation measures. As noted last week, a result that was above the top of those forecast ranges (at ‘four point something’) would place pressure on the RBA Board to respond with a rate increase. For now, though, financial market pricing continues to predict a much greater chance of no change to monetary policy in early August.

    Also, a quick mention that this week sees a special episode of the AICD’s Dismal Science podcast – we have reached Episode #200! As well as a discussion of some of the economic implications of that US election campaign, we also take the opportunity to look back at how the themes and preoccupations of the podcast have changed over time.

    What happened on the Australian data front this week?

    The ANZ-Roy Morgan Consumer Confidence Index jumped five points to an index reading of 84.4 in the week ending 21 July 2024. That was the largest weekly rise recorded since April 2021 and took the index level up to a six-month high. All five subindices increased by more than five index points last week, with the largest gain recorded by the ‘current financial conditions’ subindex, which rose 5.7 points to record its second-strongest result since early last year. ANZ suggested that the sharp increase in confidence was likely the product of Budget 2024’s Stage 3 tax cuts and cost-of-living relief measures starting to feed into an improved financial position for households. Meanwhile,  weekly inflation expectations index fell 0.1 percentage point to five per cent.

    aus-consumer-confidence

    The Judo Bank Flash Australia Composite PMI fell to 50.2 in July from 50.7 in June, hitting a six-month low while still – just – remaining in positive territory. That decline in the overall index mirrored a fall in the Flash Australia Services PMI Business Activity Index from 51.2 in June to 50.8 in July (another six-month low). At the same time, the Flash Australia Manufacturing PMI Output Index dropped to a four-month low of 46.3, down from 46.8 in June. Overall, then, the PMI readings suggest that business activity in the Australian economy is now close to stagnating, with a weaker rise in services activity accompanied by a deeper fall in manufacturing output. Any impact from the Budget’s cost-of-living measures noted above are yet to make themselves felt in terms of output growth, if not in sentiment. The survey results also showed the rate of input cost inflation hitting a 16-month high, which Judo Bank said reflected an acceleration in services input inflation as the Fair Work Commission’s increase in the minimum wage produced greater pay pressures.

    aus-composite-pmi

    Other things to note . . .

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