The Australian Industry Group Australian Performance of Services Index (Australian PSI®) fell by 6.3 points to 36.2 points in September 2020 (seasonally adjusted), indicating a further reduction in activity and at a faster pace than in August (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 for which results were available in September (trend). The muted optimism seen in July diminished across August and September, as the depth and longevity of activity restrictions and border closures continued to weigh on demand nationally. All indicators were firmly negative in September, with the indices for sales, new orders and supplier deliveries decreasing significantly from the previous month.
The stage four activity restrictions in Melbourne were frequently mentioned by survey respondents as having a strong constraining effect on demand. Business closures, uncertainty, lack of opportunity and difficulty accessing finance also weighed heavily on activity for some respondents. Positive pockets of trade were driven by ongoing strength in goods for home-based activities including home improvement, entertainment and health-related products. Some businesses in locations with no reports of COVID-19 noted improving optimism among their local customers. Others said that demand is returning from their international customers.
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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.
