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Media Release

Economic activity stable in March, according to CBA Flash PMI

CBA Flash PMI: Economic activity stable

Early data shows decline in services activity offset by manufacturing growth.

Business activity in the Australian private sector has stabilised at the end of the first quarter of the year following a decline in February, new CBA data shows.

The latest “flash” CBA Composite Purchasing Managers Index (PMI) released today shows the service sector was again the main source of weakness with activity continuing to fall, albeit at a slower pace than last month. The manufacturing sector provided an offset with activitiy continuing to expand in the month.

CBA Senior Economist Kristina Clifton said: “Softer economic conditions experienced over the second half of 2018 have continued into the first quarter of 2019.”

The headline index rose to 50.0, up from 49.1 in February, showing activity has stabilised at a lower level.

New orders were unchanged in March, while job creation was the slowest in the 35-month survey so far.

Relatively weak demand conditions has led to softer business sentiment, with confidence around the 12-month outlook the lowest since June 2016.

Looking ahead

“The headline PMI remains at 50 suggesting activity was stable in the month following a decline last month. The forward looking indicators have softened, with the new orders component at 50 following a contraction last month. The employment component fell, but remains above 50 indicating employment is still expanding,” said Ms Clifton.

“Solid jobs growth is helping consumers navigate an environment of falling house prices and weak wages growth,” she said.

“It looks likely that there will be personal income tax cuts announced in the upcoming Federal Budget. Personal income tax cuts would support consumer spending, a positive for the business sector.”

Why are PMIs important?

The PMIs are important because they cover key areas of the economy.

They are part of the global suite of PMI releases published by IHS Markit.

Manufacturing activity tends to be cyclical in nature, so turning points in the CBA Manufacturing PMI can provide early warning signals of turns in the business cycle more generally.

Services activity tends to be less cyclical and is on a long‑run structural uptrend, so the level of the CBA Services PMI is important when assessing the resilience of the Australian economy more broadly.

How are the PMIs calculated?

The PMI surveys cover senior purchasing managers in 400 Australian companies in the manufacturing and service sectors each month. The survey began in May 2016.

Manufacturers are surveyed each month on how output, orders, jobs, delivery times and stocks have changed relative to the previous month.

The survey results are presented as diffusion indexes. These indexes have leading indicator properties and show the direction of change. A reading above 50 indicates expansion. The further above (below) 50, the stronger the expansion (contraction).

The CBA PMI surveys cover manufacturing and services, or close to 75 per cent of GDP [gross domestic product].

The ability to access 80‑85 per cent of survey results earlier means that reliable 'flash' estimates can be published sooner. It brings the Australian survey into line with flash estimates for the Eurozone and Japan.