News Column

Australian PSI: Services Index Improves Slightly in July

August 5, 2014



NORTH SYDNEY, Australia, Aug. 5 -- The Australian Industry Group issued the following news release:

While remaining in contractionary territory for the fifth straight month, the Australian Industry Group Australian Performance of Services Index (Australian PSI) improved slightly in July on the back of growth in sales and new orders. The index was up 1.7 points to a mildly contractionary level of 49.3 (readings below 50 points indicate contraction).

The shift in the sales and new orders sub-indexes, which moved slightly above 50 points, was contrasted by continued contraction in supplier deliveries, stocks and employment - businesses are still unwilling to commit more working capital or to hire more staff due to the relatively flat economic outlook.

Only three of the nine services sub-sectors expanded in July, as was the case in June, with growth still concentrated in the health and community services (59.6 points), finance and insurance (64.0 points), and accommodation, cafes and restaurants (61.1 points) sub-sectors (three month moving averages).

Ai Group Chief Executive, Innes Willox, said: "The services sector is hovering on the cusp of growth, with the Australian PSI hinting at the long-awaited expansion in activity that is needed to make up for the weakness in the sector over the past couple of years. Businesses will be encouraged by the pick-up in sales and new orders. This could be a sign that uncertainties over Budget measures and the fall-off in demand for business services connected to slowing mining-related construction are fading in relative importance. At this stage, however, services businesses will need more solid evidence of an uplift and they are not yet at the point of adding staff," Mr Willox said.

Australian PSI - Key Findings for July:

* Both the sales and new orders sub-indexes in the Australian PSI moved to slightly above 50 points in July, indicating a stabilisation or very mild expansion.

* Despite the improvement in sales and new orders, services businesses continued to reduce supplier deliveries and stock levels, with the supplier deliveries sub-index moving up by 3.3 points to 47.8 in July, signalling a mild contraction.

* The wages sub-index rose by 6.9 points to 64.6 points in July, reflecting the 3% increase in the national minimum and award wage rates, as well as the increase in the Superannuation Guarantee rate to 9.5% that took effect from 1 July.

* The retail trade sub-index in the Australian PSI was mostly unchanged in July, decreasing by 0.5 points to 46.0 points, indicating further contraction in the retail industry, which last expanded in June 2011.

* The wholesale trade sub-sector index moved lower in July, falling 3.1 points to 43.5 - the lowest level since October 2013 (three month moving averages). This sub-sector has now contracted for 33 consecutive months.

* The accommodation, cafes and restaurants ('hospitality') sub-sector expanded strongly for a second month in July, rising a further 6.8 points to 61.1 - the highest level since May 2007 (three month moving average).

* The giant health and community services sub-sector continued to expand in July, although its sub-index declined by 2.5 points to 59.6 points (three month moving averages).

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

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Source: Targeted News Service


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