The Australian Industry Group Australian Performance of Services Index (Australian PSI®) fell by 1.5 points to 42.5 points in August (seasonally adjusted), indicating a further contraction in activity and at a faster pace than in July (results below 50 points indicate contraction, with lower numbers indicating a stronger pace of decline).
The Australian PSI® continued to indicate contraction in all sectors in August (trend). The introduction of stage 4 restrictions in the greater Melbourne area following some optimism in July weighed heavily on business activity in Victoria and the impact was felt across other states. All indicators were firmly negative for August and employment decreased significantly from the previous month.
Lower customer demand, increased activity restrictions and uncertainty all contributed to the deterioration in services activity in August. Consumer sales have been impacted by business closures and reduced operating capacity, tightening income and falling employment. Some business-oriented respondents reported that uncertainty regarding timing for conditions to ease in Melbourne, coupled with concern that they could be introduced in other locations was delaying investment decisions and dampening demand.
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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.
