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Australian PSI®: Business improves for services sector in August 2019

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose by 7.5 points to 51.4 in August 2019, marking a return to mildly positive conditions after a weak month in July (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 services sector grew modestly in August (2019) in contrast to the sharp contraction in services sector performance in July (2019). While sales continued to slip, service sector businesses hired more employees in August (2019) and new orders were also higher. Consumer-oriented sectors generally lifted in August (2019) with hospitality, health & education and recreation & other services all growing. Retail sales on the other hand slumped further in the month. Of the business-oriented sectors, only finance & insurance saw performance lift in the month with other sectors doing worse than in July (2019). With the sector experiencing considerable volatility in recent month, it is dangerous to read too much into the more positive August (2019) reports but service-sector businesses will be hoping for a flow-through to sales from the personal income tax measures and interest rates reductions to grow over coming months,” Mr Willox said.

Australian PSI® – Key Findings for August (2019):

  • The Australian PSI® indicated expansion in four of its eight sectors in August (2019). Among business-oriented sectors, only finance & insurance reported positive results (up 0.3 points to 51.6), while consumer-oriented sectors were again led by the large health, education & community services sector (up 3.0 points to 65.2). Retail trade continued to languish, ending several months of easing contraction with a slightly faster rate of decline (down 0.2 points to 45.2).
  • Among the activity indexes in the Australian PSI®, employment achieved strong growth in August (up 11.4 points to 55.2) while supplier deliveries also returned to expansion (up 11.8 points to 52.3). New orders edged back into positive territory (up 7.3 points to 51.4), while sales fell but at a slower pace than in July (2019) (up 2.4 points to 47.5).
  • Input price pressures index increased across all services sectors in August (2019), reversing the index’s downward trend since its peak in December 2018 (up 2.4 points to 63.4). The rate of decline in selling prices (evident across both business- and consumer-facing businesses for the last year) eased slightly (up 1.7 points to 47.5).
  • The average wages index rose by 2.4 points to 59.2 in August (2019), indicating a lift in wage pressures across all services sectors except retail, where it was stable.

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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