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Australian PSI®: Strong sales and new orders lift services sector

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose by 2.9 points to 58.7 in March 2021, recording its highest monthly result since June 2018 as the recovery following the COVID-19 recession of 2020 continued to gain strength (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 recovery of Australia’s services sector accelerated in March 2021 on the back of strong sales and a leap in new orders. Employment in the services sector, which has been slower to recover than in other parts of the economy, was close to stable in March 2021. Activity in the business-oriented service sectors of logistics and business & property services improved most markedly. The consumer-oriented sectors of retail trade & hospitality; health & education; and personal, recreational & other services maintained a broadly steady pace of expansion. While areas of vulnerability clearly remain, the strong lift in new orders is an encouraging sign that the services sector as a whole is well positioned to work through the winding down of fiscal stimulus in the next few months,” Mr Willox said.

Australian PSI® – Key Findings for March 2021:

  • All five of the services sectors included in the Australian PSI® indicated growth in March (2021). Among the business-oriented sectors, logistics (up 8.3 points to 69.4) and business & property services (up 10.7 points to 55.0) benefitted from surging demand, while consumer-oriented sectors expanded with the easing of restrictions, improved confidence and delayed spending across previous months.
  • Four of the five activity indices in the Australian PSI® expanded in March 2021, with only the employment index declining mildly (up 6.3 points to 49.0). The indices for sales (down 2.0 points to 63.7), new orders (up 9.1 points to 67.5), deliveries (down 2.5 points to 54.8) and inventories (down 0.8 points to 54.2) all posted robust rates of growth, reflecting the best conditions (i.e., the highest activity index results) reported by businesses in the Australian PSI® since June 2018.
  • The input prices index rose further in March 2021 (up 0.3 points to 64.7), marking nine months of increases following the index’s record low in June 2020. Average wages also grew (up 2.7 points to 61.0), one year on from that index’s record low. The selling prices index also improved to its strongest rate since January 2008 (up 1.7 points to 57.9), suggesting services businesses are passing on higher input costs, following a year of subdued prices.

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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