Intractable inflation in September
Consumer price inflation (CPI) rose to 1.2% in the September quarter, faster than in June.
The September inflation data was a surprise, exceeding both market expectations and official forecasts.
Automotive fuels (+7.2%), rents (+2.2%) and electricity (+4.2%) were the main contributors to the uptick in inflation.
This data suggests inflation will remain higher, and for longer, than previously expected.
Capex is climbing
According to Australian Bureau of Statistics (ABS) data, private new capital expenditure (capex) was 19.9% higher in the June quarter than the year prior.
Non-mining capital expenditure grew even faster at 23.4%, showing the surge is across the board. This was the highest year-over-year increase in capex seen for a decade.
Manufacturing, transportation, and utilities sectors experienced high capex growth. However, the building sector had low growth as it struggled with financial pressures.
Household spending holds (for now)
Household spending stabilised in August, after a period of slowing growth this year.
Discretionary household spending was stable in August, following three months of contraction.
Non-discretionary household spending grew by 9.1%, a sizeable uptick after several months of weakness.
The strong labour market continues to provide a backstop for household spending as interest rates rise and the economy continues to slow.
New job creation declines
As the Australian economy slows, new job creation is beginning to slow as well.
Australia added 23,000 new jobs in September (trend data). This is the lowest monthly increase in trend new jobs since the end of the pandemic.
Currently, around 36,000 new jobs per month are needed to absorb new labour market entrants.
When job creation is lower, either unemployment will rise and/or participation will fall.
If this trend of slowing job creation continues in coming months, tightness in Australian labour markets will soon begin to ease.
Absenteeism back to average
Labour absenteeism in Australia appears to have returned to its pre-pandemic pattern.
Absenteeism due to illness typically follows a seasonal patten, peaking at 4.0-4.5% during winters and falling to 2.0-2.5% in summers.
During COVID reopening in 2022 this normal pattern broke down, with high (>5%) absenteeism throughout the year.
But in 2023 the normal seasonal pattern has returned, with absenteeism peaking at 4.0% this winter.
Strong August for manufacturers
In August, turnover in the Australian manufacturing sector increased by 6.4% month-on-month.
August was the strongest month of manufacturing turnover growth since the pandemic.
Manufacturing had the strongest turnover figures of any Australian industry, in a month were most industries performed strongly.
Other industrials – transport, construction and utilities – showed turnover declines in August.
Easing supply chain disruptions and cost pressures have been aiding manufacturers across this year.
