Services PMI still mired in recession

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The AIG services PMI remains in recession in November:

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After dropping to a 14-month low in October, conditions in the services industry have failed to rebound this month. The seasonally adjusted Australian Industry Group Australian Performance of Services Index (Australian PSI®) was almost unchanged in November, at 43.8 points (up 0.2 points). The Australian PSI® has now contracted for nine consecutive months (readings below 50 points indicate contraction; the distance from 50 points indicates the strength of the decline). The three-month moving average for the Australian PSI® also declined further to 44.3 points in November.

• All of the activity sub-indexes in the Australian PSI® remained below 50 points (i.e. contraction) this month, suggesting a weak outlook for services businesses in the upcoming Christmas trading period. Both the sales and new orders sub-indexes contracted for a third month in November, while supplier deliveries and stocks levels have contracted for six consecutive months now. The employment sub-index picked up to 49.5 points, suggesting broadly stable services employment this month.

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• Only two of the nine services sub-sectors showed expansion this month, including the very large health and community services sub-sector (52.3 points, three-month moving averages) and personal and recreational services (51.6 points). Other consumer oriented services sub-sectors such as hospitality and wholesale and retail trade, as well as business oriented services sub-sectors, continued to contract in November.

• Despite a pick-up in residential and commercial property activities, respondents to the Australian PSI® raised ongoing concerns about the weak local economy, fragile consumer and business sentiment, slower growth in household disposable income, the continuing decline in mining construction activity, and the flat manufacturing industry.

The big mover on the month was this:

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Seasonality or slowing in credit? Full report here.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.