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Services sector improves in October 2019


The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose by 2.7 points to 54.2 in October 2019, marking three months of positive conditions following the services sector’s mid-year slump (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: “A strengthening of the Australian PSI® in October (2019) is an encouraging if tentative sign of a gradual pick-up in services sector activity. Both sales and employment were up in the month and services businesses reported another month of growth in new orders. The finance & insurance, health & education and hospitality sectors led the way and were backed by more gentle expansions in transport & storage – which entered positive territory for the first time in almost a year and a half – recreation & other services and retail trade. The growth in these sectors comfortably offset contractions in property & business services and wholesale trade. The fall in selling prices reported by businesses should serve as a note of caution and some of the sales growth was associated with price discounting. Businesses reported firm wages growth with the wages index nearing the most recent peak of 2018. While this is positive for consumer spending and sales, it contributed to a continuation of margin tightening across the services sector,” Mr Willox said.

Australian PSI® – Key Findings for October 2019:

  • The Australian PSI® indicated expansion in six of its eight sectors in October (2019). Among business-oriented sectors, finance & insurance (up 3.4 points to 63.8) and transport & storage (up 1.8 points to 52.0) reported positive results, while all of the consumer-oriented sectors landed in positive territory.
  • Among the activity indexes in the Australian PSI®, sales growth picked up significantly (up 7.5 points to 56.1) and new orders strengthened (up 0.4 points to 55.0), while employment also lifted (up 4.2 points to 54.7). Supplier deliveries slowed from the previous month but remained positive (down 1.9 points to 53.6), while inventory levels continued to decline (down 0.6 points to 47.1).
  • The input price index moderated in October (2019) but remained solidly positive (down 0.8 points to 59.3) while the average wages index accelerated for a third consecutive month (up 1.8 points to 65.1).
  • The selling prices index, negative throughout 2019, increased its rate of contraction in October (2019) (down 1.5 points to 44.5), with downward pressures on prices reported across most sectors in the Australian PSI®.

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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