News Column

Australian PSI: Fourth Consecutive Contraction in Services Sector Index

July 3, 2014



NORTH SYDNEY, Australia, July 3 -- The Australian Industry Group issued the following news release:

The Australian Industry Group Australian Performance of Services Index (Australian PSI) fell by 2.3 points in June to 47.6. It is the fourth consecutive contraction in the index this year following a brief expansion in February (readings below 50 points indicate contraction).

The deterioration in the Australian PSI was evident across all the activity sub-indexes, which were all below 50 points this month. The sales, new orders, supplier deliveries and stocks sub-indexes moved below 50 points after indicating a mild expansion last month.

Three of the nine sub-sectors in the Australian PSI expanded in June. Growth remains concentrated in health and community services (62.0 points) and finance and insurance (64.7 points, three month moving averages). Accommodation, cafes and restaurants (54.3 points) expanded in June, for the first time since April 2013. The sub-indexes for retail trade (46.5 points) and the closely related wholesale trade sub-sector (46.6 points) stayed below 50 points in June, indicating ongoing contraction in these industries (three month moving average).

Ai Group Chief Executive, Innes Willox, said: "Conditions in the services sector slipped again in June with respondents to the latest Australian PSI survey suggesting that ongoing weakness across much of the domestic economy and the public reception of the Federal Budget are dampening consumer and business confidence. With both the sales and new orders sub-indexes pointing to contraction, it appears likely that it will take several months at least to recapture the momentum that was building earlier in the year in the services sector.

"Several respondents indicated that the further deterioration in manufacturing conditions in recent months is reducing demand for business-to-business services such as accounting, IT and personnel services while poor results for the retail, wholesale and transport & storage sub-sectors pointed to further weakness in household spending," Mr Willox said.

Australian PSI - Key Findings for June:

The sales sub-index declined slightly by 0.7 points to 49.8 points while the new orders sub-index moved down by 2.7 points to 49.3 points indicating a contraction in new orders after promising growth in May.

* The supplier deliveries sub-index declined by 5.9 points to 44.5 points. Stock levels (inventories) also fell in June, with the inventories sub-index dropping by 7.1 points to 45.2 points.

* Services employment contracted for a fourth consecutive month.

* The retail trade sub-index in the Australian PSI increased by 1.8 points but remained in contractionary territory with a reading of 46.5 points.

* The wholesale trade sub-sector index in the Australian PSI moved lower again in June, declining by 1.9 point to 46.6 points.

* The accommodation, cafes and restaurants (?hospitality?) sub-index rose by 6.8 points to 54.3 points in June, indicating the first expansion in this industry since April 2013 (three month moving average).

* The very large health and community services sub-sector expand strongly again in June, with its sub-index increasing by 4.9 points to 62.0 points.

Full report (available at 930am) http://www.aigroup.com.au/portal/site/aig/economicindicators/

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