The AIG services PMI is out:
Conditions in the services sector were broadly stable in May 2015. The seasonally-adjusted Australian Industry Group Australian Performance of Services Index (Australian PSI®) was almost unchanged, at 49.6 points this month (down 0.1 points). The services sector last expanded (i.e. above 50.0 points) very mildly in February and March this year.
• The three-month moving average for the Australian PSI® eased by 0.7 points to 49.8 points in May, following two months of expansion. Recent results from the Australian PSI® suggest growth in Australian demand for goods and services (as measured by the ABS in the National Accounts as ‘domestic final demand’) may have picked up moderately so far in Q2 2015.
• Only one of the five activity sub-indexes in the Australian PSI® expanded (i.e. above 50 points) in May. Both the sales and new orders sub-indexes contracted for a second month in May. Supplier deliveries contracted for a third month in May while services businesses reduced their stock levels for a 12th consecutive month. More positively, services employment expanded for a fifth consecutive month in May and at its fastest pace since December 2004.
• Four of the nine services sub-sectors showed expansion this month. The very large health and community services sub-sector (50.3 points, three-month moving averages) expanded for a seventh month in May and the finance and insurance services sub-sector expanded for a fifth month (70.2 points). Both retail trade (53.4 points) and personal and recreational services (57.0 points) expanded for a third month. All other services sub-sectors contracted in May.
• The Federal Budget and the cut to the cash rate by the RBA in early May appear to have little impact on the services sector thus far. A buoyant housing market, very low interest rates and a lower Australian dollar are supporting conditions, but respondents raised concerns about ongoing weakness in household income growth and spending. Subdued business confidence, a poor economic outlook, and a low appetite for spending and investment, continue to affect demand for a wide range of business services.
That’s very strong for jobs, a little strange given the wider malaise, but perhaps some catch-up for what has been underperformance in the past few months. Welcome news, anyway. Full report.
