The preliminary Australian manufacturing PMI from S&P Global Platts slips deeper into contraction at 46.7
Services decline but remain in expansion at 50.6
The composite index declined due to a decline in the manufacturing PMI, with the composite index recording 49.8.
Summary of the report commentary:
- Manufacturing sector shrinks, registering lowest reading outside pandemic
- Weak PMI activity indicators over the past three months suggest that households are saving more for government stimulus than initially expected.
- Results over the past quarter indicate that the Australian economy is gradually rebalancing supply and demand at the current cash rate.
- The PMIs also reinforce the narrative of slowing job growth in the market sector, with employment barely in growth territory in September, at 50.8. This contrasts with official employment data, which has consistently shown monthly job growth at nearly three times the pre-pandemic average, driven primarily by strong hiring in the care and education sectors.
- Price pressures eased in September, but margin pressures across the economy remain.
- The producer price index, which tracks the share of companies that raise consumer prices, fell to its lowest level since January 2021 and is now close to its pre-pandemic average.
- Despite the sharp decline in the input price index, it remains only slightly below its FY24 average and well above 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 weak demand, margin pressures are likely to persist through FY25.
—
The data in these PMIs do not highlight anything unknown, but they do support the current “narrative”:
- Labor markets appear to be supported by government hiring.
- Inflationary pressures have eased, but the Australian Bureau of Statistics’ CPI data will remain the focus.
Last week I published an article about inflation expectations slowing:
- Australia CPI Preview – Commonwealth Bank of Australia expects ‘headline inflation to return to RBA target in August’
- Australian CPI Monthly Preview for August – Westpac Bank expects 2.7% YoY for monthly reading
And preview the Reserve Bank of Australia statement due tomorrow:
Australian dollar:
When can we expect the Reserve Bank of Australia to cut interest rates?
—
Australian Dollar Update, Slightly Lower After PMI Data: