The Australian Industry Group Australian Performance of Services Index (Australian PSI®) jumped up by 15.2 points to 51.4 points in October 2020 (seasonally adjusted), indicating a tentative recovery in national domestic demand is under way as of early Q4, following Australia's COVID-19 slump in Q2 and Q3. This was the first positive month for the services sectors since November 2019 (results above 50 points indicate expansion, with higher numbers indicating a stronger pace of expansion).
The Australian PSI® indicated growth in one sector, stability in two sectors and contraction in two sectors. All activity indicators were positive or stable in October, with the indices for sales, new orders and supplier deliveries improving significantly from the previous month.
Businesses reported a pick-up in activity in locations other than Melbourne, with some respondents noting an improvement in regional Victoria as restrictions eased. Outside of Melbourne, government stimulus, customers building inventory and improved confidence led to an increase in sales, new orders and deliveries. Some respondents reported similar sales levels to this time last year. In Melbourne however, the stage four activity limitations continued to constrain demand during October. Business closures and reduced capacity due to restrictions, supply delays and shortages as well as longer-term uncertainty weighed heavily on activity for some sectors.
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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.
