Australian Manufacturing Index Holds at 49.6 as Inflation Accelerates Ahead of Rate Decision
Key Facts
Australia’s manufacturing purchasing managers’ index held at 49.6 points in October, matching September’s reading, according to S&P Global data cited by Investing.com. The index remained below 50, the dividing line between contraction and growth, for a second consecutive month. The reading came in slightly below the 49.7-point forecast. Meanwhile, the private monthly inflation gauge rose to 0.5% in October from 0.3% in September, according to Newsquawk. The simultaneous data put weakness in manufacturing activity and accelerating prices in focus ahead of the Reserve Bank of Australia’s meeting on 3 November.
A drop in new orders was the main source of pressure on factories; orders fell at the fastest pace since December 2024, driving a clear decline in output, according to S&P Global data cited by Trading Economics. Jingyi Pan of S&P Global pointed to weakening demand coinciding with mounting supply constraints at the start of the fourth quarter. “Australian manufacturers faced a double blow at the start of the fourth quarter, as mounting supply constraints compounded deteriorating demand,” he said. Weak orders mean less work for factories, while supply difficulties make it more costly for them to respond to demand. The index showed no improvement from September, remaining at the same level of 49.6 points.
Activity pressures coincided with rising input costs, as inflation in companies’ production costs accelerated due to higher energy and raw-material prices, alongside supplier and shipping costs, according to the same data. Factory output prices rose for the first time in five months, as companies passed higher cost burdens on to customers. “Production costs rose for the first time in five months, as companies chose to pass their growing burdens on to customers,” the data said. This points to some input-cost pressures feeding through to selling prices, alongside declines in orders and output. These remain manufacturing survey indicators, alongside the monthly inflation gauge, while official statistics provide a broader picture of price movements.
Data from the Australian Bureau of Statistics showed consumer price index inflation at 4.3% in the 12 months to September, compared with 4.0% in the 12 months to August. Underlying inflation, measured by the trimmed mean, rose to 3.6% from 3.5% over the same respective periods. At the producer level, final demand prices, excluding exports, rose 1.1% in the September quarter and 3.6% year on year. The bureau attributed the increase to growth in the construction and services sectors. These official figures add to the picture of price pressures reflected in the private monthly inflation gauge’s rise to 0.5% in October.
The next central bank meeting comes after the Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.60% in September. The bank said at the time that inflation “remains too high” and that a further tightening of financial conditions was “warranted.” The official cash rate target is 4.60%, effective since 30 September, according to the bank. The monetary policy decision and quarterly Statement on Monetary Policy are due on 3 November at 2:30 p.m. Australian Eastern Daylight Time, with a press conference scheduled for 3:30 p.m. The Australian Bureau of Statistics has also set 25 November at 11:30 a.m. Australian Eastern Daylight Time for the release of the October consumer price index.