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Customers sit outside a cafe at Bondi Beach in Sydney © Mark Baker/AP

Australia’s private sector shrank for the first time in four months as the Omicron variant of the coronavirus disrupted operations, according to the latest Purchasing Managers’ Index data.

The IHS Markit Flash Australia Composite Production Index fell to a five-month low of 45.3 in January from 54.9 in December 2021 as output and private sector demand declined while job growth stopped.

Australia’s economy appears to have rebounded in the second half of 2021. But a sharp rise in Omicron infections, which hit a daily record of nearly 90,000 last week, has dampened growth, hurt consumer confidence and the business optimism and affected supply chains, with supermarkets and the hospitality sector hit by anemic workforces. These factors have contributed to runaway price inflation.

The mineral-rich state of Western Australia continued to keep its border closed to other Australian territories due to the spread of Omicron.

Jingyi Pan, economist at IHS Markit, said: “Australia’s economy had moved from a state of strong recovery [at] end of 2021 to be affected by the upsurge in Covid-19 infections in early 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 hope for ‘a turnaround in the absence of new restrictions imposed’.

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