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Australian PSIĀ®: Services sector stays slow in March

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) was relatively unchanged in March, rising just 0.3 points to 44.8 – the third month of contractionary conditions for the services sector following a positive run since 2017 (results below 50 points indicate contraction, with the distance from 50 points indicating the strength of the decrease).

The March results also represented the first time every sector in the Australian PSI® has experienced contraction in trend terms since August 2010.

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Ai Group Chief Executive, Innes Willox, said: "The Australian services sector continued to lose ground last month, bringing the March quarter to a close with the third consecutive fall in the Australian PSI®. Across the sector, sales and new orders were weak and margins tightened with both business-facing and consumer-facing service providers reporting contractionary conditions. The bright spot was a turnaround in employment with a lift in the employment sub-index for the first time since before last November. Businesses will be hoping the boost to household incomes announced in last night’s Federal Budget will translate into higher sales and help fuel a recovery of the confidence that has sagged over recent months," Mr Willox said.Australian PSI® – Key Findings for March:

  • The Australian PSI® was relatively unchanged in March (up 0.3 points to 44.8), once again remaining in the negative territory held since January's sharp contraction.
  • In trend terms (see table below), the Australian PSI® indicated contraction across all business-oriented and consumer-oriented sectors in March – the first month that all sectors experienced negative growth since August 2010.
  • Only one of the five activity indexes in the Australian PSI® indicated expansion in March, with employment improving from stability into mild growth (up 2.9 points to 52.2). Sales (up 0.7 points to 38.5) and new orders (up 3.8 points to 42.3) both shrank for a third month, while deliveries fell into contraction from stable conditions last month (down 4.0 points to 46.9). Stocks fell following nine months of accumulation in inventory (down 10.2 points to 44.8).
  • The input prices index moderated by 1.2 points to 59.2 in March, while the selling prices index continued to contract, albeit at a slower rate (up 1.4 points to 44.8).
  • The average wages index grew by 6.1 points to 59.1 in March, indicating an acceleration in wage pressures across the services sectors. While the average wages sub-index has been trending down since a recent peak of 65.0 points in June 2018, this result tipped it just above its long-term average (57.0 points since 2009).

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Seasonally adjusted

Index this month

Change from last month

12 month average

Trend

Index this month

Change from last month

12 month average

Australian PSI®

44.8

0.3

52.3

Business & property

49.4

-0.4

55.7

Sales

38.5

0.7

50.5

Finance & insurance

49.6

-0.5

54.4

Employment

52.2

2.9

53.3

Wholesale trade

44.7

-0.3

50.0

New Orders

42.3

3.8

52.9

Transport & storage

44.3

-1.4

49.1

Supplier deliveries

46.9

-4.0

52.0

Communications

32.8

-5.0

48.5

Finished stocks

44.8

-10.2

53.2

Consumer-oriented services

     

Capacity utilisation (%)

77.5

-0.9

79.3

Retail trade

37.6

-1.8

48.4

Prices and wages

     

Hospitality

42.5

-2.7

50.0

Input prices

59.0

-1.2

62.4

Health & education

44.7

-1.7

55.6

Selling prices

44.8

1.4

48.6

Recreation & other services

42.1

-5.0

50.4

Average wages

59.1

6.1

60.0

       
Results above 50 points indicate expansion. All indexes for sub-sectors in the Australian PSI® are reported in trend terms (Henderson 13-month filter).

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.

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Tony Melville: 0419 190 347