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.