By James Glynn


SYDNEY--Australia's economy continues to register a clear and detectable pulse, with purchasing managers' index data for May remaining firmly in expansionary territory.

The Judo Bank flash Australia composite PMI output Index came in at 52.6 in May, down from 53.0 in April. The result suggests that private-sector activity expanded for a fourth straight month.

The strength of the report comes despite evidence elsewhere strongly suggesting that the economy has slowed as the impact of higher interest rates and a cost-of-living surge curbs consumer spending, while lowering consumer confidence to levels consistent with a deep recession.

"At face value, the strength in the Australian PMI activity indexes in 2024 points to an economy growing at around the long-term trend rate, if not a touch higher. But we know that consumer spending remains soft and will be a drag on growth over the first half of 2024," said Warren Hogan, chief economic advisor at Judo Bank.

The mixed messages on the economy are keeping the Reserve Bank of Australia on edge. It kept interest on hold at a policy meeting last week but warned that the outlook for the economy is highly uncertain and kept all policy options on the table.

The good news from the Judo Bank data is that despite soft consumption growth, businesses are still hiring and creating jobs, which should keep the economy expanding over the year ahead, Hogan said.

The employment index rose to its highest level in more than six months in May, suggesting that private-sector demand for labor remains strong.

Still, price indicators were also up, with the composite input price index rising to the highest level in six months in May.

Service-industry cost pressures were up slightly, confirming that there has been no real easing of cost pressures in the last 12 months, Hogan said.

"This does not suggest that we will see a material step down in domestic inflation pressures in the second quarter," Hogan added. "Any increase in goods inflation in the presence of stubbornly high domestic service sector inflation is a major concern for the RBA."


Write to James Glynn james.glynn@wsj.com; @JamesGlynnWSJ


(END) Dow Jones Newswires

05-22-24 2042ET