Australia preliminary Sept PMI: Manufacturing 46.7 (prior 48.5) Services 50.6 (prior 52.5)

Preliminary Judo Bank S&P Australian Manufacturing PMI slips deeper into contraction at 46.7

• prior 48.5

Services slips lower but remains in expansion at 50.6

• prior 52.5

Composite dragged into contraction by the sliding manufacturing PMI, composite comes in at 49.8

• prior 51.7

In summary from the report commentary:

• manufacturing sector
  contracted, posting its lowest index reading outside
  of the pandemic
• The weakness in PMI activity indicators over the
  past three months suggests that households are
  saving more of the government stimulus than initially
  expected
• results over
  the past quarter indicate that the Australian economy
  is gradually bringing supply and demand back into
  balance at the current cash rate
• PMIs also reinforce the narrative of slowing job
  growth in the market sector, with employment barely
  staying in growth territory in September, at 50.8. This
  contrasts with official employment data, which has
  consistently shown monthly job growth nearly three
  times the pre-pandemic average, primarily driven by
  significant hiring in the care and education sectors
• price pressures eased in September, margin
  pressures across the economy remain
• output
  price index, which tracks the share of businesses
  raising consumer prices, fell to its lowest point since
  January 2021, now close to its pre-pandemic average
• despite a sharp decline in the input price index,
  it remains only slightly below its FY24 average and
  significantly higher than 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 subdued demand, margin
  pressures are likely to persist through FY25

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The data in these PMI indicators are not highlighting anything unknown, but are supportive of current ‘narrative’:

• the jobs markets appears to being propped up by government hiring
• inflation pressures are easing, but CPI data from the Australian Bureau of Statistics will remain the focus

I posted last week on expectations for slowing inflation:

• Australia CPI preview – CBA expect “Headline inflation in August back within RBA’s target”
• Australian August Monthly CPI preview – Westpac expect 2.7% y/y for the monthly read

And preview of the RBA statement due tomorrow:

• RBA meeting – preview – to leave the cash rate on hold at 4.35%

AUD:

• AUD/USD support: RBA on hold with strong jobs market, sticky CPI; Fed policy divergence

And, when to expect a rate cut from the RBA:

• CBA shifts expected RBA rate cut timing to December 2024 (from November)

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AUD update, a wee few tics lower after the PMI data:

This article was written by Eamonn Sheridan at www.forexlive.com.