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Mild lift in services sustained in September 2019

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose by 0.1 points to 51.5 in September 2019, with improved new orders and supplier deliveries sustaining the mild pick-up in conditions seen in August 2019 (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: “There was a modest lift in the performance of the Australian services sector in September (2019), building on a similar result in August (2019) after performance slipped in July (2019). There was considerable variation across the diverse services sector with health & education and finance & insurance businesses growing most strongly, backed up by a lift in hospitality services. Offsetting these positive contributions were falls in the business & property, wholesale trade, transport & storage and recreation & other services groups. Retail trade was broadly stable after declining for the best part of a year. Employment by services businesses was steady in September (2019) and new orders were higher across the sector despite contractionary pressures flowing from lower building activity and drought conditions. Service businesses will be hoping the latest interest rate reduction adds to the delayed impacts of the earlier easing in monetary policy and personal income tax cuts to stimulate a broader and more decisive lift in performance over coming months,” Mr Willox said.

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

  • The Australian PSI® indicated expansion in three of its eight sectors in September (2019). Among business-oriented sectors, only finance & insurance reported positive results (up 2.5 points to 57.8). Consumer-oriented sectors were again led by the large health, education & community services sector (up 0.1 points to 62.8), while hospitality was mildly positive (down 1.8 points to 52.2). Retail trade reported broadly stable conditions after 10 months of contraction (up 2.4 points to 50.6).
  • Among the activity indexes in the Australian PSI®, new orders (up 3.2 points to 54.6) and supplier deliveries (up 3.2 points to 55.5) were positive and indicating growth in September (2019), while employment was stable (down 4.7 points to 50.5). Sales contracted (up 1.1 points to 48.6) and inventory levels declined (down 3.2 points to 47.7).
  • Input price pressures moderated in September (2019) (down 3.3 points to 60.1) but selling prices deteriorated further (down 1.5 points to 46.0) and have now been in contraction for 13 of the past 14 months.
  • The average wages index rose by 4.1 points to 63.3 in September (2019), indicating a lift in wage pressures across all 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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