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New business performance index highlights summer slump

Ai Group has today published for the first time an aggregate Australian Performance of Business Index (Australian PBI). This first public report confirms deteriorating levels of business conditions and activity as Australia moved into 2020.

The Australian PBI fell by 0.8 points to 46.6 points in January 2020. In the previous month (unpublished until today) the Australian PBI* recorded a drop by 3.9 points to 47.4 points in December 2019 (seasonally adjusted). Results below 50 points in the Australian PBI indicate deteriorating business conditions, with lower numbers indicating a faster pace of deterioration in the month.

Ai Group Chief Executive, Innes Willox, said: "The January result represents a deepening of the contraction recorded in December and reflects an underlying sluggishness in local business activity, exacerbated by a summer marred by widespread drought, bushfires and the initial impacts of the Coronavirus.

"All four of the activity indexes included in the Australian PBI indicated contractions in January. Current production declined at about the same rate as in December. The employment index dropped into contraction for the first time since July. The more forward-looking indicators in the Australian PBI – new orders and supplier deliveries – both showed substantial declines in December and January, albeit at a moderating pace in January.

"The trifecta of drought, bushfires, and virus fears comes on top of a generally slowing economy and reinforces the case for the federal government to introduce a generous investment allowance to get private sector investment moving. This would stimulate the broader economy, create more jobs and lift productivity," Mr Willox said.

The Australian PBI is a weighted aggregate of Ai Group's Australian Performance of Manufacturing Index (Australian PMI®), Australian Performance of Services Index (Australian PSI®) (released today and available at this link), and Australian Performance of Construction Index (Australian PCI®).

SUMMARY

The Australian PBI declined by a further 0.8 points to 46.6 points in January, after slumping by 3.9 points to 47.4 points in December.

The PBI production / activity index declined by a further 0.4 points to 46.7 points in January, indicating an accelerating rate of decline through December and January.

The PBI employment index deteriorated by 3.5 points to 48.8 points in January, indicating a mild fall in employment levels across all businesses. This was the first negative result (under 50 points) since July.

The PBI new orders index improved by 0.7 points to 47.5 points in January, indicating a moderation in the sharp fall in orders that was evident in December.

The PBI capacity utilsation index fell slightly in each of December and January, but at 79.1% it remains close to recent peaks (80.2 in August 2019) and is well above its long-run average (75.2%).

The PBI input prices index lifted slightly (+0.5 points) to 61.0 points in January.

The PBI selling prices index fell by 0.6 points to 50.3 in January, indicating broadly stable prices after four months of mild price rises in 2019.

The PBI average wages index rose by a further 0.4 points to 63.0 points in January, which was the highest result since August 2018.

The full Australian PBI report is available at this link.

More information on the Australian PBI is available at this link

* Ai Group's Australian PBI is a new publication for 2020, but it is based on our performance index data commencing from 2006.

Ai Group has been closely monitoring the economy-wide snapshot this aggregated data provides for some time. We have now decided to publish and share this valuable information more widely.

Media enquiries:
Tony Melville – 0419 190 347