Preliminary S&P Global / Judo Bank flash PMIs from Australia for October 2023.
Wow, an ugly set of numbers. Services have plunged back into contraction.
Commentary from the report. in summary
- New orders weakened in October and are below the 50 neutral level, indicative of a soft landing across the economy. The Output and the New Orders Index would have to fall substantially further to be consistent with a broader economic recession.
- the slowdown in business activity thus far has not translated into a significant reduction in hiring intentions. Australian businesses are still looking to expand their workforce, consistent with ongoing net new job creation in the official employment report.
- Of most significant concern is further evidence of inflation ‘stickiness’. That is, both the input and output price indexes remain elevated and do not signal a return of inflation to the RBA’s target anytime soon.
- The RBA will receive the final October readings before the board meeting on Melbourne Cup day. These latest results should not materially impact the interest rate decision. A strong case exists for a further modest upward adjustment to the Australian cash rate target, to ensure the economy remains on the so-called ‘narrow path’. If we are to avoid recession, Australia will need an extended period of below-trend growth to ensure inflation returns to target by 2025.
