Services activity bounces in November 2018

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The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose 4.0 points to 55.1 in November 2018, indicating accelerating growth in a 21st 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: “After easing in recent months, the pace of expansion in the Australian services sector bounced into higher growth territory in November 2018 as sales and new orders both accelerated. Businesses will be hoping the November 2018 bounce is shown to be more than a bring-forward of holiday-season spending and is sustained over coming months. While employers continued to add more staff, employment grew more gradually in November 2018. There were mixed results across the diverse services sector with consumer-facing sectors such as retail and hospitality services reporting stronger results than some of the business-facing service sectors such as finance & insurance, transport and wholesale services which contracted during the month. Selling prices remained under pressure across the sector while input prices and wages both rose, further squeezing margins,” Mr Willox said.

Australian PSI® – Key Findings for November 2018:

  • The Australian PSI® has indicated positive conditions (results above 50 points) for 21 months, and stable or expansionary results for 26 months.
  • All five activity indexes in the Australian PSI® expanded in November 2018. Deliveries (up 3.9 points to 57.8) and stocks (up 0.6 points to 54.1) accelerated over the month, while new orders (up 9.4 points to 56.8) and sales (up 8.7 points to 54.5) both rose from contraction in October 2018.
  • Five of the nine services sectors expanded in November 2018. Business-oriented sectors delivered mixed results, with communication services accelerating (up 1.6 points to 55.8) while business & property services moderated but remained positive (down 1.3 points to 51.8).
  • The consumer-oriented services sectors were mostly positive, with hospitality (up 2.1 points to 62.6) and retail trade (unchanged at 56.5) reporting expanding results.
  • The input prices index fell by 3.4 points to 59.4, with respondents continuing to report increasing costs for energy (particularly gas) and imports which have been rising due to the lower trading range of the Australian dollar against the US dollar. The average wages index rose by 5.6 points to 60.3.
  • The selling prices index rose by 2.0 points to 47.8 – a fifth month of flat or falling prices as services business have been unable to increase their charges despite increasing pressure on profit margins.

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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