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Australian PSI®: Solid growth for services in July

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose by 1.6 points to 56.4 in July, recording a fifth consecutive month of expansion for the services sector (results above 50 points indicate expansion, with the distance from 50 points indicating the strength of the increase).

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July marked a fifth month of expansion for the services sector and the strongest monthly result since December 2016. Business-oriented services are experiencing reasonably good conditions, with finance and insurance, communications services and business services all registering an expansion in demand and activity. Wholesale trade and transport services also expanded modestly in July.

Despite the overall expansion in the sector the trading environment remains patchy for the more consumer-oriented services. And while personal and recreational services businesses reported strong conditions in July, local retailers are still suffering from weak demand and tough competition and the very large health and community services and hospitality (food and accommodation) services sectors are reporting stable conditions at best.

Ai Group Chief Executive, Innes Willox, said: "High energy costs are negatively affecting business margins in 2017. At near 80 cents and possibly rising, the higher dollar could soon start to bite into margins and into demand for local goods and services as well. Another mildly negative result for the Australian PSI® selling prices sub-index (49.1 points) tells us that services businesses are finding it difficult to pass on these higher input costs (including energy costs) to their customers," Mr Willox said.

Australian PSI® – Key Findings for July:

  • All five activity sub-indexes in the Australian PSI® indicated growth in July (see table below) with sales (up 5.6 points to 60.3) and employment (up 3.7 points to 56.9) both expanding more strongly. New orders also continued to expand, but at a slower rate than in June (down 3.7 points to 55.2).
  • Six of the nine services sub-sectors in the Australian PSI® expanded in July (trend data*), led by personal & recreational services (up 4.8 points to 62.1), finance & insurance (up 2.8 points to 59.6) and communication services (up 3.3 points to 56.3).
  • The health & community services (up 1.0 point to 50.5) and hospitality (up 0.1 point to 49.5) sub-sectors were both relatively stable.
  • Input price rises moderated in July (down 0.4 points to 58.9), with respondents continuing to single out high energy cost pressures across a range of sectors. The wages sub-index weakened by 1.2 points to 55.1.
  • The sub-index for selling prices slipped back into contraction, falling 2.9 points to 49.1 – continuing a weak run that reflects a fiercely competitive market against a background of low inflation.

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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®

56.4 

1.6

52.0

Supplier Deliveries

54.5

1.4

51.3

Sales

60.3

5.6

53.2

Input prices

58.9

-0.4

59.8

New Orders

55.2

-3.7

53.6

Selling Prices

49.1

-2.9

49.2

Employment

56.9

3.7

51.6

Average Wages

55.1

-1.2

55.8

Stocks

50.8

-0.5

47.1

Capacity Utilisation (%)

78.2

1.2

76.6

* 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