• Activity levels across Australia’s services and manufacturing sectors have stabilised after falling steadily in recent months.
• New orders remain soft while employment grew at the slowest pace on record in March.
• Sentiment towards conditions in the year ahead fell to 33-month lows.
• Australia’s economy slowed sharply in the second half of last year. The signals from the March quarter suggest that sluggish growth has continued in early 2019.

After a pronounced slowdown late last year and early 2019, activity levels across Australia’s services and manufacturing sectors have stabilised.

The Commonwealth Bank’s Flash Australia Composite Purchasing Managers Index (PMI), produced in conjunction with IHS Markit, rose to 50.0 in March after seasonal adjustments, recovering after dipping to 49.7 in February, the lowest level in the three-year history of the survey.

The composite PMI measures changes in activity levels across Australia’s services and manufacturing sectors from one month to the next. Anything above 50 signals activity levels are improving, while a reading below suggests they’re deteriorating.

The distance away from 50 indicates how quickly activity levels are expanding or contracting. So at 50, activity levels were unchanged in March.

The flash estimate is derived from around 85% of survey responses, and is a fairly accurate guide as to what the final PMI will show when released one week later.

Combined, the services and manufacturing sectors account for around three-quarters of the Australian economy, the vast majority being services.

The flash manufacturing PMI fell to 52.0, down from 52.9 in February, while the services PMI rose to 49.8, up 0.1 percentage points from a month earlier. That means activity levels for manufacturers continued to improve, albeit at a slower pace, while those for services firms deteriorated at a marginal rate.

While, as a whole, activity levels stabilised across Australia’s private sector during the month, the internals of the report were weak, hinting there’s unlikely to be much of an improvement, if any at all, in the coming months.

New orders were flat, driven by a decline for services firms and slower growth for manufacturers, while employment growth slowed to lowest level in the history of the survey.

Reflecting that backdrop, sentiment towards conditions in the year ahead fell to the lowest level in nearly three years.

“There are some indications that business sentiment has been affected by the negative news flow,” said Kristina Clifton, Senior Economist at the Commonwealth Bank.

“Weak Q4 GDP numbers and talk of a per capita recession are reflected in business comments about a ‘challenging’ economic environment.”

Clifton also acknowledged that some pre-election jitters are also impacting on sentiment.

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