Australian Composite Index Falls to 47.7 in October as Price Pressures Accelerate
Key Facts
Australian private-sector activity slipped into contraction in October, with the seasonally adjusted flash S&P Global composite index falling to 47.7, according to Dow Jones coverage. The index had stood at 51.3 in September before shifting from growth to decline this month. A reading below 50 indicates a contraction in activity from the previous month, according to S&P Global's methodology. Activity thus reached its lowest level since March, extending the weakness in business operations. The contraction coincided with accelerating input-cost and selling-price inflation in October, leaving the survey showing both declining activity and mounting price pressures ahead of the next monetary policy meeting.
The shift into contraction followed weakness in manufacturing output and slower services growth in September, according to S&P Global's analysis for that month. Manufacturing output contracted at its fastest pace in 21 months as orders for goods resumed their decline. In services, the firm attributed slower growth to the impact of higher prices on demand, placing price pressures among the factors affecting the sector ahead of the October reading. It also cited relatively weak market conditions, alongside the impact of prices on demand for services. The firm said business confidence returned in September to "one of the lowest levels recorded since the pandemic," alongside weak output and slower growth in services activity.
On employment, the business survey showed an increase in jobs in October despite the contraction in activity, according to Dow Jones. Services led job creation during the month, diverging from the decline in economy-wide employment recorded in September. The Australian Bureau of Statistics reported that seasonally adjusted employment fell by 39,300 people in September, while the seasonally adjusted unemployment rate stood at 4.7%. The labour force participation rate fell by 0.2 percentage points that month. It stood at 66.8%, according to the bureau's seasonally adjusted data, with September's job losses accompanied by a decline in labour force participation.
The price pressures captured by the October survey follow an acceleration in annual consumer price inflation to 4.0% in August, according to the Australian Bureau of Statistics. Headline inflation had stood at 3.5% in July before rising the following month. By contrast, annual trimmed mean inflation held at 3.6% in August, unchanged from July, diverging from the acceleration in the headline measure over the same period. At its latest meeting in September, the Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.60%, according to its statement. The bank said disruptions to global oil supplies were maintaining upward pressure on global and domestic energy prices and inflation, identifying a channel through which price pressures were persisting in the Australian economy.
Ahead of the October index release, Reserve Bank of Australia Deputy Governor Andrew Hauser warned at a Citi conference that "the inflation outlook looks materially worse than we expected in the August report." Reuters reported in its coverage of his remarks on October 21 that markets were pricing in a roughly 40% chance of a rate increase to 4.85% in November. That probability had risen from 30% at the start of the week, in pricing that preceded the release of the flash private-sector activity reading. The Australian Bureau of Statistics will release September consumer price data on October 28, 2026, providing the next checkpoint for inflation developments. That will be followed by the Reserve Bank of Australia's Monetary Policy Board meeting scheduled for November 2 and 3, 2026, after the rate increase it approved in September.