Preliminary Judo Bank S&P Australian Manufacturing PMI slips deeper into contraction at 46.7
- prior 48.5
Services slips lower but remains in expansion at 50.6
- prior 52.5
Composite dragged into contraction by the sliding manufacturing PMI, composite comes in at 49.8
- prior 51.7
In summary from the report commentary:
- manufacturing sector contracted, posting its lowest index reading outside of the pandemic
- The weakness in PMI activity indicators over the past three months suggests that households are saving more of the government stimulus than initially expected
- results over the past quarter indicate that the Australian economy is gradually bringing supply and demand back into balance at the current cash rate
- PMIs also reinforce the narrative of slowing job growth in the market sector, with employment barely staying in growth territory in September, at 50.8. This contrasts with official employment data, which has consistently shown monthly job growth nearly three times the pre-pandemic average, primarily driven by significant hiring in the care and education sectors
- price pressures eased in September, margin pressures across the economy remain
- output price index, which tracks the share of businesses raising consumer prices, fell to its lowest point since January 2021, now close to its pre-pandemic average
- despite a sharp decline in the input price index, it remains only slightly below its FY24 average and significantly higher than the pre-pandemic average of 56.8. Whether this input price pressure translates into higher consumer inflation depends on a potential rebound in household spending in FY25. However, with early indicators showing subdued demand, margin pressures are likely to persist through FY25
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The data in these PMI indicators are not highlighting anything unknown, but are supportive of current 'narrative':
- the jobs markets appears to being propped up by government hiring
- inflation pressures are easing, but CPI data from the Australian Bureau of Statistics will remain the focus
I posted last week on expectations for slowing inflation:
- Australia CPI preview - CBA expect "Headline inflation in August back within RBA’s target"
- Australian August Monthly CPI preview - Westpac expect 2.7% y/y for the monthly read
And preview of the RBA statement due tomorrow:
AUD:
And, when to expect a rate cut from the RBA:
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AUD update, a wee few tics lower after the PMI data:
