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Services sector returns to growth in May 2019

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose by 6.0 points to 52.5 in May 2019 – the first month of positive results for the services sector in 2019 after four months of contractionary conditions (results below 50 points indicate contraction, with the distance from 50 points indicating the strength of the decrease).

Ai Group Chief Executive, Innes Willox, said: “Australia’s services sector saw a welcome return to growth in May (2019) following four months of weakness in 2019 to date. While performance across the sector as a whole lifted, results were mixed across services sub-sectors. The hospitality, wholesale and health sub-sectors were major contributors to growth while the retail sub-sector remained stuck in the slow lane. While overall sales edged lower, new orders rose strongly, encouraging businesses to add to overall services sector employment – the first month recording employment growth so far this year (2019). A number of survey respondents indicated an expectation of improved trading conditions now that the uncertainties surrounding the federal election have been resolved,” Mr Willox said.

Australian PSI® – Key Findings for May 2019:

  • The Australian PSI® indicated expansion in four of its eight sectors in May 2019. Among business-oriented sectors, wholesale trade reported robust results (up 3.0 points to 55.8), while consumer-oriented sectors were led by hospitality (up 4.1 points to 60.1). Retail trade’s decline continued for a sixth month (up 0.2 points to 40.4).
  • Four of the five activity indexes in the Australian PSI® were positive in May 2019, with new orders lifting substantially after four months in contraction (up 11.0 points to 55.6). Deliveries were also robust (up 10.2 points to 55.3), but the weakness in the sales index continued in a fifth month of decline (down 0.3 points to 48.4). Employment returned to positive territory (up 6.2 points to 52.2), reversing April 2019’s decline.
  • The input prices index lifted in May 2019 to end four consecutive months of decelerating growth in costs (up 1.4 points to 59.4), while the selling prices index remained in negative territory but recorded it highest result since December 2018 (up 5.6 points to 47.7).
  • The average wages index rose by 14.1 points to 62.3 in May 2019, rebounding from April 2019’s all-time low to indicate an increase 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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