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Australian PSI®: Sharp drop in services during August

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) returned to contraction in August after three months of growth, falling by 8.9 points to 45.0 – its lowest reading since November 2014 (results below 50 points indicate contraction, with the distance from 50 points indicating the strength of the decrease).

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Ai Group Chief Executive, Innes Willox, said: "The sharp fall in the Australian PSI® in August reflected a large drop in sales and slumps in the employment and new orders sub-indexes. When combined with the return to contraction of the Australian Performance of Manufacturing Index (Australian PMI®) as reported last week, the disappointing performance of the services sector sounds a sobering warning of the fragility of the economy. The results demonstrate that business urgently needs confidence-building measures which drive productivity and reduce costs and barriers to growth. Now, more than ever, business needs all sides of politics to act together in the national interest,” Mr Willox said.  

Australian PSI® – Key Findings for August:

  • All five activity sub-indexes in the Australian PSI® fell below 50 points and into contraction in August, including sales, new orders, employment, stocks and supplier deliveries (see table below).
  • Five of the nine services sub-sectors in the Australian PSI® expanded in August (in three-month moving averages – thus reflecting performance since June rather than in August only). Three of the larger sub-sectors expanded at a slower rate: retail trade (down 10.0 points to 55.0); finance & insurance (down 6.9 points to 55.1); and communication services (down 0.8 points to 52.4). Two of the smaller sub-sectors improved: personal & recreational services (up 7.8 points to 54.5); and wholesale trade (up 3.0 points to 51.9 – its highest level since January 2011).
  • The very large health & community services sub-sector remained stable (down 0.3 points to 49.9), while transport & storage services reached a record low (down 0.6 points to 32.9).
  • The input prices sub-index grew at a faster pace in August (up 4.6 points to 59.9), while wages lifted 3.5 points to 52.9 following three months of broad stability. Selling prices fell 9.1 points to 43.3, reversing the gains of July and indicating ongoing competitive pressures in a weaker market.

View all Economic Indicators

Seasonally adjusted

Index this month

Change from last month

12 month average

Seasonally adjusted

Index this month

Change from last month

12 month average

Australian PSI®

45.0

-8.9

49.7

Supplier Deliveries

46.1

-8.4

49.6

Sales

43.7

-15.9

51.2

Input prices

59.9

4.6

62.3

New Orders

47.5

-4.7

50.3

Selling Prices

43.3

-9.1

49.0

Employment

43.5

-6.5

48.3

Average Wages

52.9

3.5

53.4

Stocks

44.4

-8.4

48.6

Capacity Utilisation (%)

79.2

1.9

76.1

* All sub-sector indexes in the Australian PSI® are reported as three-month moving averages (3mma), so as to better identify the trends in these volatile monthly data.

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.

Media Enquiries: Graham Turner – 0415 285 320