Australian PSI: Slower Growth For Services In August

Australian PSI: Slower growth for services in August

The Australian Industry Group Australian Performance of Services Index (Australian PSI) fell 1.4 points to 52.2 in August, indicating a further slowing of growth from July following June's record high (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: "With mixed news across the sector and with cost pressures on the rise, service businesses will be keeping a close eye on how conditions unfold over the next couple of months. While service-sector sales and new orders gained ground in August, the pace of growth across the services sector eased again following July’s distinct deceleration. The slower pace of sector-wide expansion was reflected in a broadly stable level of employment in August in contrast to the solid growth seen in the first half of 2018. The standout sub-sector in August was health, education and welfare services which posted strong gains while the finance & insurance and property & business service sub-sectors continued to make solid contributions. Hospitality services continued to lag while communications services remained flat and transport services reverted to contraction following a very brief respite," Mr Willox said.

Australian PSI – Key Findings for August:

• The Australian PSI has indicated positive conditions (results above 50 points) for 18 months, and stable or expansionary results for 23 months.

• Four of the five activity sub-indexes in the Australian PSI expanded in August (see table below). New orders continued to grow but at a slower pace (down 1.3 points to 52.0) while sales moderated but continued to expand (down 2.3 points to 52.9). Supplier deliveries reversed July's contraction (up 4.2 points to 51.7), while inventories expanded but at a slower rate (down 4.0 points to 56.0).

• Employment was stable over the month following 14 months of continuous expansion (down 2.8 points to 50.6).

• Five of the nine services sub-sectors expanded in August (trend), with mixed results. Some business-oriented sub-sectors such as property (down 1.6 points 60.4 points) and finance (down 1.3 points to 57.9) reported steady demand from customers servicing mining and infrastructure projects, but transport & storage businesses noted slowing activity (down 5.2 points to 44.6).

• The very large health sector also reported positive results (up 0.3 points to 63.0), as did retail (up 3.0 points to 57.0) and wholesale trade (down 0.6 points to 53.5), but other consumer-oriented sub-sectors had deflated results.

• The input prices sub-index increased by 5.6 points to 65.6, with respondents continuing to report pressure on margins as they are unable to increase their selling prices, which were stable in August (49.6 points) after six months of mild rises.

• Wages growth eased but remained elevated (down 3.8 points to 59.0), with 1 July's national minimum wage increase of 3.5% perhaps contributing to rising wages in some businesses.

Seasonally adjusted index	Index this month	Change from last month	12 month average	Seasonally adjusted index	Index this month	Change from last month	12 month average
Australian PSI®	52.2	-1.4	54.7	Supplier Deliveries	51.7	4.2	54.3
Sales	52.9	-2.3	54.0	Input Prices	65.6	5.6	62.1
New Orders	52.0	-1.3	55.7	Selling Prices	49.6	-1.0	50.6
Employment	50.6	-2.8	55.2	Average Wages	59.0	-3.8	59.1
Stocks	56.0	-4.0	53.3	Cap. Utilisation (%)	78.5	-1.7	79.6

* All sub-sector indexes in the Australian PSI are reported in trend terms (Henderson 13-month filter), to better identify the trends in these volatile monthly data.

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.

AIG Services Index

Please click below to read the full report: