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Australian PSI®: Services conditions weak again in July 2019

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The Australian Industry Group Australian Performance of Services Index (Australian PSI®) fell by 8.3 points to 43.9 in July 2019 – the largest monthly fall since July 2018 as trading conditions took a dive following two months of more positive results (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: “The July (2019) turndown in the large services sector is a sharp reminder of the fragility of the domestic economy. Across the sector, sales, employment and new orders all contracted in the month notwithstanding that the benefits of personal income tax cuts and reductions have begun to flow through to households and businesses. The transport & storage, recreation & other services along with retail trade sectors were all well down on June (2019) levels, more than offsetting gains in health & education, hospitality and wholesale trade sectors. Both business & property and finance & insurance remained stable. With income growth subdued and both consumer and business confidence appearing to weaken, the risks of a broader and longer slowdown are clearly accumulating. Service businesses in particular will be hoping that, as the flow of stimulus from tax cuts and interest rates deepens, sales will begin to pick up,” Mr Willox said.

Australian PSI® – Key Findings for July 2019:

  • The Australian PSI® indicated expansion in three of its eight sectors in July (2019). Among business-oriented sectors, only wholesale trade reported positive results (up 0.5 points to 56.0), while consumer-oriented sectors were again led by the large health, education & community services sector (up 3.2 points to 60.8).
  • All five activity indexes in the Australian PSI® were negative in July (2019), with new orders (down 12.7 points to 44.1) and supplier deliveries (down 12.3 points to 40.5) tumbling into contraction. The start of the financial year saw weak sales (down 8.0 points to 45.1) as business customers had brought forward spending in June (2019).
  • The input prices index increased by 3.9 points to 61.0 in July (2019), while the decline in selling prices (evident across both business- and consumer-facing businesses for the last year) decelerated slightly (up 0.4 points to 45.8).
  • The average wages index slowed by 0.5 points to 56.8 in July (2019(, indicating a mild easing in wage pressures across the services sectors.

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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