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.

Australia preliminary flash PMI October 2023

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.