Key insights:

• The Australian private sector has dipped into contraction territory for the first time in the CBA PMI survey’s history, indicating the Australian economy has lost momentum.
• Behind the reduction in output was a dip in services business activity amid reports of a soft market demand and drought conditions.
• The move lower in PMI readings is part of a global trend and highlights the increasing concerns central bankers hold about the global economic outlook.

Key quotes from CBA Chief Economist Michael Blythe:

• “The dip in the PMI below the 50 line that separates expansion from contraction is a significant event. It is the first negative reading in the life of the Australian PMI survey.”
• “It indicates a loss of momentum in the Australian economy at the start of 2019. It also underlines the shift in forward guidance by the RBA to a more neutral setting.”
• “The divergence between contracting service sector activity and expanding manufacturing activity should be noted. It shows the slowdown is not broadly based and the more forward looking components like jobs and business sentiment point to a recovery later in 2019.”