Retail

Infrastructure activity lifts services

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The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose 0.3 points to 52.5 in September 2018, indicating mild growth in a 19th consecutive month of positive conditions (results above 50 points indicate expansion, with the distance from 50 points indicating the strength of the increase).

Ai Group Chief Executive, Innes Willox, said: “Australia’s services sector continued to expand in September 2018, recording mild growth over the month much as it has for the first quarter of the financial year. While new orders and deliveries gained ground during the month, stocks eased slightly and sales returned much the same moderate result as in August 2018. The incremental sector-wide expansion was again reflected in a broadly stable level of employment as it was in August 2018, in contrast to the solid growth seen in the first half of 2018. Increased consumer spending saw a lift in the retail trade and hospitality sub-sectors in contrast to the contractionary results they experienced in the recent past, while the benefits of robust activity in infrastructure construction were felt in the finance & insurance, property & business and wholesale trade subsectors,” Mr Willox said.

Australian PSI® – Key Findings for September:

  • The Australian PSI® has indicated positive conditions (results above 50 points) for 19 months, and stable or expansionary results for 24 months.
  • Four of the five activity sub-indexes in the Australian PSI® expanded in September 2018. New orders continued to grow and at a slightly faster pace than in August 2018 (up 1.4 points to 53.4) while sales returned almost the same modest growth result (down 0.1 point to 52.8).
  • Employment continued to be mostly stable across the services sector in September 2018 (down 0.8 points to 49.8).
  • Seven of the nine services sub-sectors expanded in September 2018 (trend). Business-oriented sub-sectors such as property (down 3.1 points 54.8 points) and finance (down 2.2 points to 55.1) reported steady demand from construction projects, although transport & storage businesses noted a continued contraction in business activity (down 3.9 points to 39.9).
  • The very large health sector also reported positive results (down 1.4 points to 57.7), as did retail trade (up 2.0 points to 59.2), while wholesale trade was virtually unchanged from the previous month.
  • The input prices sub-index eased by 3.7 points to 61.9, with respondents continuing to report pressure on margins as they are unable to increase their selling prices, which dropped into contraction in September 2018 to reverse the mild gains seen in the first six months of 2018 (down 3.2 points to 46.4).
  • The average wages sub-index rose by 4.3 points to 63.3 in September 2018, with 1 July 2018’s national minimum wage increase of 3.5% perhaps making its way through the payroll system of some businesses.

Background: The Ai Group Australian PSI® is a leading indicator of services activity in the Australian economy. It is a seasonally adjusted national composite index based on the diffusion indices for sales, orders/new business, deliveries, inventories and employment with varying weights. An Australian PSI® reading above 50 points indicates that services activity is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline. Results are based on a sample of around 200 companies each month.

Source: Ai Group

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