BNY’s Bob Savage flags softer Australian activity, with manufacturing PMI only marginally in expansion as new and export orders fall and cost pressures stay intense. The Melbourne Institute inflation gauge dipped on fuel, while national home values were flat, with Sydney and Melbourne declining. Markets price limited further Reserve Bank of Australia (RBA) tightening as consumer sentiment and housing momentum weaken.

Weaker activity and softer housing

“Australia’s manufacturing PMI eased to 50.7 points in May from 51.3 in April, remaining marginally in expansion territory but masking weaker underlying conditions across the sector.”

“Inflationary pressures remained intense, with input costs rising at the second-fastest pace in almost four years and output price inflation accelerating to its highest level since August 2022.”

“Australia’s Melbourne Institute monthly inflation gauge fell in May after two consecutive m/m rises.”

“Australian home values were unchanged nationally in May, in the first flat m/m result since January 2025.”

“The market is reluctant to price in more than one additional hike for the rest of the year amid further signs of caution in household sentiment, especially if housing costs continue to ease.”

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