The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose by 4.5 points to 31.6 points in May, indicating another serious contraction in activity, albeit at a slower pace than in April. This was the second lowest result in the history of this series (commencing in 2003), following a record low in April (results below 50 points indicate contraction, with lower numbers indicating a stronger pace of decline).
Heavy restrictions on activity in response to the COVID-19 pandemic have taken a large toll on most of Australia's services industries. The Australian PSI® indicated contraction in all sectors in May. Restrictions on commercial activity have now been in place since March, to varying degrees, around Australia. The recent easing of restrictions in some locations led to muted optimism for businesses who responded later in May.
Reduced customer demand was evident for most businesses across all services sectors in May. An easing of restrictions was reported by some businesses as having had a positive impact on demand in some states. Retailers and wholesalers who supply products for home improvements, medical product suppliers and ICT services reported more positive customer demand in May. Some businesses said the previous element of panic buying for their products in March and April has now fallen away.
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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.
