Australia’s private sector shrank for the first time in four months as the Omicron coronavirus variant disrupted operations, the latest purchasing managers’ index data show.
The IHS Markit Flash Australia Composite Output Index fell to a five-month low of 45.3 in January from 54.9 in December 2021, as both private sector output and demand declined while employment growth ground to a halt.
The Australian economy appeared to have bounced back in the second half of 2021. But a sharp rise in Omicron infections, which saw a daily record of almost 90,000 last week, has curbed growth, hurt consumer confidence and business optimism and affected supply chains, with supermarkets and the hospitality sector hit by anaemic staff levels. Those factors contributed to rampant price inflation.
The mining-rich state of Western Australia has continued to keep its border closed to other Australian territories as a result of the spread of Omicron.
Jingyi Pan, an economist with IHS Markit, said: “The Australian economy had slipped from a state of strong recovery [at] end-2021 to being affected by the surge in Covid-19 infections at the start of 2022.”
Despite the disruption posed by Omicron, Pan said there was cause for optimism: “There have been some early positive signs of Covid-19 infections peaking in Australia which may offer some hopes for a turnaround in the situation absent any further restrictions imposed.”