Flash Judo Bank / S&P Global October PMI reading is here:
Warren Hogan, Chief Economic Advisor at Judo Bank commentary from the report, in summary:
- The slight decline in the PMI index to 48.2 masks a more profound fall in the key output and new orders indexes.
- The output and new orders indexes fell to concerning levels in October, lower than what would normally be associated with a soft patch.
- The employment index fell to the lowest level since the 2020 lockdowns, although the index level remains above the 50 index level.
- The solid employment result also cautions against reading too much into the falls in output and new orders in October.
- Cost pressures increased further in October, with the input price index rising to the highest level since March. There has been a clear upward trend for costs since the June low point, which is indicative of an intensification of business cost pressures in the current financial year.
- Contrary to rising input prices, there has been another fall in the output price index. Output prices remain above the neutral 50 level, indicative of low inflation of manufactured goods. Output prices are now back down to what would be considered normal prior to the pandemic.
- Rising cost pressures and low final price inflation do not bode well for manufacturers' margins and profitability. If margin pressures are sustained, businesses will eventually need to pull back on investment and hiring to protect profitability.
IMO there is not a lot positive in this report. Its not overly concerning, but it doesn't inspire confidence. I'm expecting an RBA rate hike next week, the meeting is November 7, which will be another challenge for this sector.
