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Australian PSI®: Services sector accelerates in March

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) climbed 2.9 points to 56.9 in March – a 13th consecutive month of positive results and at the fastest pace of expansion since December 2016 (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 further pick-up in the pace of services sector activity in March is another sign of growing resilience across the domestic economy. The sector saw increases in sales and employment in March as seven of the nine sub-sectors expanded: only retail and hospitality services did not improve on February's levels. The continued rise in employment by service businesses is particularly encouraging and has been closely related to the period of wage moderation that has helped businesses maintain and improve their competitiveness. While new orders for services grew strongly in March and point to further growth in the months ahead, the gradual upward trend in wages and the increasing reports of difficulties filling skilled positions, suggest that capacity constraints will intensify over the course of 2018," Mr Willox said.

Australian PSI® – Key Findings for March:  

  • All five activity sub-indexes expanded in March (see table below), highlighted by robust growth in supplier deliveries (up 8.3 points to 61.3). New orders (up 4.2 points to 59.0), sales (up 0.3 points to 55.0) and stocks (up 2.3 points to 55.0) all edged higher, while manufacturing employment enjoyed a 10th month of growth, rising a further point to 54.9.
  • The Australian PSI® was positive across seven of the nine services sub-sectors in March, with the more business-oriented sub-sectors reporting that demand from customers in construction and manufacturing is benefiting their business activity. The very large finance & insurance sub-sector achieved its highest reading since July 2015 (up 1.2 points to 62.9), while transport & storage jumped 6.5 points to a record high of 65.2.
  • The two largest consumer-oriented sub-sectors remained slow in March. Hospitality was relatively stable (down 0.8 points to 49.5) while retail trade marked a full year in negative territory (down 0.9 points to 38.2). Businesses report that slow nominal income growth and household cost pressures are restraining discretionary spending.
  • After spiking higher in February, the input prices sub-index fell 9.9 points to 59.6 in March, while wages expanded by 5.7 points to 59.9. Wage pressures appears to be building in higher-skilled occupations and in business-oriented sub-sectors.
  • The sub-index for selling prices fell 1.0 point to 51.9, indicating slower price increases for customers across the sector.

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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®

56.9 

2.9

53.5

Supplier Deliveries

61.3

8.3

53.6

Sales

55.0

0.3

53.4

Input prices

59.6

-9.9

60.4

New Orders

59.0

4.2

54.3

Selling Prices

51.9

-1.0

49.9

Employment

54.9

1.0

53.3

Average Wages

59.9

5.7

56.5

Stocks

55.0

2.3

52.0

Capacity Utilisation (%)

78.9

0.9

78.3

* 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