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Services Sector Contracting, Wages Contribute To Price Pressures

AUSTRALIA DATA

The preliminary S&P Global composite PMI for October fell to 49.6 from 50.9 in September and a 9-month low. This first dip into contractionary territory since January was driven by the services component, which was down to 49 (Sep 50.6) whereas manufacturing activity continues to grow but at its slowest in 14 months (52.8 Oct vs 53.5).

  • The details of the survey showed demand and output declining and as a result the level of work outstanding improved, especially in services. The weakness was driven by domestic demand as foreign demand continues to grow, helped by the weaker AUD.
  • However, the survey also showed that hiring continues to be robust in anticipation of future demand and to rebuild workforces. Price pressures are also persisting, especially fuel, wages and raw materials, which are boosting output prices and weighing on overall confidence.
  • S&P Global note that “Anecdotal evidence suggested a deterioration in economic conditions at the start of Q4 contributed to lower new business.”
  • See press release here.
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