Australian private-sector activity index falls to 47.70 in October as services contract
Key Facts
Australian private-sector activity slipped into contraction in October 2026, with the composite purchasing managers' index falling to 47.70, according to the reading published on Investing's economic calendar on October 22. The decline followed a reading of 51.3 in September, which S&P Global said reflected a modest increase in business activity. Readings below 50.0 indicate a decline in activity from the previous month, according to the firm's methodology. The composite index's shift into contraction coincided with a drop in the services business activity index to 47.8 from 51.9 in September, according to Investing. September's composite activity reading was the lowest in 3 months, according to S&P's analysis, placing October's contraction after an earlier slowdown in growth. The shift comes ahead of the next monetary policy meeting and amid cost pressures identified by the business survey in the previous month.
In manufacturing, the purchasing managers' index edged up to 49.7 in October from 49.6 in the previous reading, according to Investing's economic calendar. The reading therefore remained below the threshold separating expansion from contraction, despite the limited improvement from September. Manufacturing output in S&P's survey contracted in September at the fastest pace in 21 months. The firm attributed this to a renewed decline in orders for goods, indicating weak demand among manufacturers that month. It also linked rising manufacturing input costs to supply shortages and higher raw material, oil and shipping costs. Across the private sector, both input cost and selling price inflation accelerated in September. The firm said higher price inflation in services was the main driver of the acceleration.
In the labour market, Australian employment fell by 39,300 people in September, according to seasonally adjusted data from the Australian Bureau of Statistics. The seasonally adjusted unemployment rate stood at 4.7% that month, adding declining employment to the backdrop of slowing business activity. Employment trends diverged by working hours, with full-time employment rising by 34,400 people, according to the bureau. Part-time employment, by contrast, fell by 73,700 people, with losses in that category exceeding the increase in full-time jobs. On business sentiment, S&P said in its analysis of September's data that confidence had returned to one of its lowest levels since the pandemic.
The Reserve Bank of Australia sees businesses' ability to cope with rising costs as varying across sectors, according to its October Financial Stability Review. The bank said that "most businesses should be able to manage elevated cost pressures, although conditions are more challenging in some sectors." It said consumers' sensitivity to prices sometimes limits businesses' ability to pass higher costs on to customers. Smaller businesses, as well as those more dependent on energy or more exposed to the economic cycle, face greater exposure to these pressures when their financial buffers are smaller. The bank cited transport, hospitality and construction among the sectors facing this exposure, linking difficult conditions to the nature of businesses' operations and their financial capacity to absorb costs.
On consumer prices, annual inflation rose to 4.0% in August from 3.5% in July, according to the Australian Bureau of Statistics. Annual trimmed mean inflation stood at 3.6% in August, unchanged from July, diverging from the acceleration in headline inflation that month. The Reserve Bank of Australia's cash rate target is 4.60%, the level effective from September 30, 2026, according to the bank. The statistics bureau will release September consumer price index data on October 28, 2026, marking the next milestone in tracking price developments. That will be followed by the Monetary Policy Board meeting scheduled for November 2 and 3, 2026, according to the Reserve Bank of Australia's published calendar.