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Sales boost services sectors over summer holiday period

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose by 1.4 points to 54.3 over the summer holiday period (December 2020 and January 2021*), indicating a further improvement in conditions following the COVID-19 recession of 2020 (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: “In December (2020) and January (2021) the Australian services sector continued to emerge from the 2020 contraction, growing at the fastest pace in over a year. With a considerable way to go before a full recovery can be claimed, the more convincing lift in new orders is an encouraging pointer to continuing recovery over coming months. Sales also grew strongly – in part reflecting a release of pent-up demand and higher levels of confidence and employment as the sector continued to recover. The performance of individual industries varied around these sector-wide trends with business & property and the retail trade & hospitality sectors edging back into expansion; logistics gaining further ground while health services was narrowly short of expansion; and personal, recreational & other services slumping over the two months,” Mr Willox said.

Australian PSI® – Key Findings for December 2020 and January 2021:

  • This was the highest monthly result in the Australian PSI® since November 2019.
  • Among business-oriented services sectors in the Australian PSI®, logistics recovered further in December and January (up 2.1 points to 55.4) as easing restrictions, pent-up demand and improved supply boosted activity for freight and related services. Government stimulus for construction helped boost demand for business & property services (up 3.8 points to 51.2).
  • Among consumer-oriented services sectors, the retail & hospitality sector lifted into expansion (up 5.4 points to 52.2) while the large health, education & community services sector was stable (up 2.8 points to 49.1). Personal, recreation & other services continued to contract (down 5.3 points to 42.8).
  • Three of the five activity indices in the Australian PSI® expanded and two were stable in December and January (seasonally adjusted). The indices for employment (down 0.5 points to 55.9), sales (up 5.5 points to 60.2) and new orders (up 2.9 points to 54.8) indicated recovering or positive conditions, while deliveries (down 5.0 points to 47.3) and finished stocks (up 1.6 points to 45.0) contracted.
  • The input prices index jumped up in December and January (up 10.8 points to 62.6), marking a solid half-year of increases from a record low in June 2020. Average wages also increased (up 7.4 points to 64.9), after an unprecedented five months of contraction earlier in 2020. Selling prices remained in contraction (down 1.8 points to 45.0) but, taken together, these indexes indicate a very modest increase in inflationary pressures.

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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