Australia’s private sector output declined at the sharpest pace since the survey began in May 2016, flash survey data from IHS Markit showed on Friday.
The Commonwealth Bank of Australia composite output index fell to 48.6 in January from 49.6 in December. A score below 50 indicates contraction in the sector.
Sharper reductions in output were seen across manufacturing and service sectors. The flash services Purchasing Managers’ Index came in at 48.9, down from 49.8 in the previous month.
At the same time, the manufacturing PMI fell marginally to 49.1 from 49.2 a month ago.
There is some fundamental weakness in the Australian economy associated with consumer constraint, the residential construction downturn and the reluctance of business to invest, CBA chief economist, Michael Blythe said.
But the PMI results are also being influenced by the terrible bushfires around Sydney and elsewhere.
At this stage, the impact seems to be mainly through disruption to supply chains, Blythe noted. Supplier delivery times have increased sharply.