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Australian PSIĀ®: Services sector shows solid start to 2018

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) lifted by 2.9 points to 54.9 in January – an 11th consecutive month of positive results and at an accelerating rate of expansion compared with late 2017 (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 strength with which the services sector has opened 2018 is another sign that confidence and momentum are building across the domestic economy. While the sector as a whole extended its expansionary run to 11 months, the Australian PSI® also continued to show considerable variation in activity across sub-sectors in January.

"Conditions are generally looking better in the business-oriented sub-sectors than in consumer-oriented sub-sectors. Business confidence and orders from business customers improved in January, further boosted by a rebound in real estate transactions in some locations. Stronger labour demand is evident in the increase in reports of skill shortages in specialised fields.

"Businesses across all sub-sectors continue to report problems absorbing higher input costs including higher energy and regulatory costs. These cost rises are eating into margins and increasing the pressure on businesses to lift prices," Mr Willox said.

Australian PSI® – Key Findings for January:

  • January marked eleven consecutive months of expansion in the Australian PSI®, the longest such run since March 2008 (18 months).
  • All five activity sub-indexes expanded in January (see table below). Employment was especially strong, recording its highest monthly result since December 2004 (up 5.4 points to 58.1 points).
  • The Australian PSI® continues to show considerable variation in activity across the nine services sub-sectors, with conditions generally looking better in the business-oriented sub-sectors than in consumer-oriented sub-sectors. The three sub-sectors to expand were property & business services (67.8 points – its highest monthly trend result since the Australian PSI® commenced in 2003); financial & insurance services (51.5 points) and transport & storage (51.5 points) (all in trend terms).
  • Input prices remained elevated but moderated by 3.0 points to 60.7 in January, with participants still reporting problems absorbing higher energy costs. The wages sub-index accelerated by 1.4 points to 57.5 points.
  • The sub-index for selling prices jumped by 6.6 points to 51.8. This was the first indication of solid increases in selling prices in the Australian PSI® since June 2017.

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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®

54.9 

2.9

52.6

Supplier Deliveries

53.7

-4.8

52.4

Sales

53.9

4.8

52.6

Input prices

60.7

-3.0

59.3

New Orders

54.5

3.5

53.3

Selling Prices

51.8

6.6

49.5

Employment

58.1

5.4

53.0

Average Wages

57.5

1.4

56.5

Stocks

52.5

1.7

50.6

Capacity Utilisation (%)

81.1

1.8

77.8

* All sub-sector indexes in the Australian PSI® are reported in trend terms (Henderson 13-month filter), 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: Tony Melville: 0419 190 347