Australian Economic Growth Slows as September PMI Falls to 50.8
Business activity remains in expansion territory, but weaker services and manufacturing, softer demand and renewed export weakness point to fading growth momentum
Australia’s economic activity continued to expand in September, but at a noticeably slower pace, according to the latest S&P Global flash Purchasing Managers’ Index (PMI). The composite PMI, which combines manufacturing and services activity, fell from 52.7 points in August to 50.8 points in September, remaining above the 50-point level that separates expansion from contraction.
The latest figures indicate that the economy has maintained its expansion through the quarter, but the pace of growth has weakened as businesses face softer demand, reduced export activity and rising cost pressures.
Services slow as manufacturing falls into contraction
The slowdown was broad-based across the two major parts of the private economy. The services PMI fell to 51.4 points from 53.3, showing that activity in the larger services sector continued to expand but at a slower pace.
Manufacturing was weaker still, with the sector's PMI falling from 52.0 to 49.3 points, pushing it into contraction territory. The decline suggests factory activity has lost momentum after expanding in the previous month.
A fall in export business also weighed on overall new orders. As the expansion in new business slowed, companies recorded their first round of job losses since May, adding another sign that weaker activity is beginning to affect labour demand.
Cost pressures remain a concern
Alongside slower growth, businesses also faced renewed pressure on input prices. The rate of input price inflation increased to its highest level in three months, although it remained below the levels recorded during the second quarter.
S&P Global Market Intelligence economist Eleanor Dennison said the Australian economy had ended the third quarter on a weaker footing, with September data pointing to a continued loss of growth momentum.
She also noted that businesses had become less confident about their growth prospects, with weaker demand, payroll reductions, stronger cost pressures and renewed export weakness contributing to the softer outlook.
What it means for investors
For investors, the September PMI provides an early indication that economic growth is losing momentum, even though overall activity remains just above the expansion threshold. The combination of slower services activity, manufacturing contraction and weaker export demand could become increasingly important if the trend continues into the final quarter.
The employment decline and renewed cost pressures are also worth watching, particularly as they could influence household spending and business investment. Investors will be looking to upcoming economic data for confirmation of whether September's slowdown represents a temporary loss of momentum or the beginning of a broader weakening in Australian activity.
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