Australian PSI®: Services businesses report a stronger month of recovery in February

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose in February by 1.5 points to 55.8 – the highest monthly result since June 2018 – with the recovery following the COVID-19 recession of 2020 gaining in strength (results above 50 points indicate expansion, with the distance from 50 points indicating the strength of the increase).

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Ai Group Chief Executive, Innes Willox, said: "The Australian services sector rebounded further from the 2020 recession in February with strong growth in sales driving expansion in the logistics, retail trade & hospitality, health & education and personal, recreation & other services sectors. In contrast, the business & property services sector slipped into contraction with weaknesses in the business-to-business segments of the sector. While the continued improvement in conditions is heartening, employment fell in February following a strong recovery in the preceding months. Employers and employees will be hoping that the further growth in new orders recorded in February signals the continued recovery of sales and employment over the next few months," Mr Willox said.

Australian PSI® – Key Findings for February 2021:

• The Australian PSI® indicated growth in four services sectors, with only business & property services contracting (down 4.6 points to 44.3). All three consumer sectors expanded in February (see table below), with delayed spending across previous months, easing restrictions and home improvement sales driving demand.
• Four of the five activity indices in the Australian PSI® expanded, with only the employment index declining (down 13.2 points to 42.7). The indices for sales (up 5.5 points to 65.7), new orders (up 3.6 points to 58.4), deliveries (up 10.0 points to 57.3) and inventories (up 10.0 points to 55.0) posted a more robust rate of recovery, reflecting the best conditions (i.e., the highest activity index results) reported by businesses in the Australian PSI® since June 2018.
• The input prices index rose further in February (up 1.8 points to 64.4), marking eight months of increases following the index’s record low in June 2020. Average wages also grew (down 6.6 points to 58.3), but the rate of increase slowed from previous months. The selling prices index improved to its strongest rate since April 2011 (up 11.2 points to 56.2), suggesting services businesses are passing on higher input costs, following a year of subdued prices.

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Results above 50 points indicate expansion. All indexes for sub-sectors in the Australian PSI® are reported in trend terms (Henderson 13-month filter).
na: Results are not available for this sector in this period due to unusually low survey response numbers. All sectors are included in the total results.
 

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.

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