Service PMI eases

The AIG services PMI is out:

  The services sector expanded for a fourth consecutive month in September, achieving its longest period of continuous expansion since March 2008. While the pace of expansion slowed by 3.4 points to 52.3, the Australian Industry Group Australian Performance of Services Index (Australian PSI^®) remained above the 50-point level separating expansion from contraction.

Ai Group Chief Executive, Innes Willox, said: “The continued expansion of the services sector in September was marked by growth in six of the nine services sub-sectors. This broadening of the sources of domestic growth is an encouraging sign of an economy responding favourably to the stimulus of low interest rates and the further fall in the Australian dollar. Still-buoyant housing market activity is clearly a factor in the growth of some sub-sectors and there is some early evidence that changes in the political environment may have supported consumer confidence and sales. Local tourism, retail and other consumer services are noticing the benefits of the lower dollar offsetting the higher local currency prices of imported inputs.”

Australian PSI^® – Key Findings for September:

• The Australian PSI^® expanded for a fourth straight month in September, falling 3.4 points to 52.3.

• Three of the five activity sub-indexes expanded: new orders (down 5.1 points to 51.8) and services sales (down 6.9 points to 58.5) each expanded for a fourth month, if at a slower pace; stock levels were stable (up 5.9 points to 50.0).

• Supplier deliveries remained about stable (down 0.1 point to 49.9), while employment slipped into mild contraction (down 3.6 points to 48.9) after two months of expansion.

• Six of the nine services sub-sectors grew in September: the finance & insurance sub-sector added a ninth month of expansion (down 3.6 points to 61.9), while property & business services (up 1.2 points to 59.7) expanded for a third month. Health & community services (up 5.5 points to 58.4) and hospitality (up 4.1 points to 55.1) continued August’s return to growth, while transport & storage (up 2.9 points to 50.9) stabilised for the first time since July 2012.

• The retail trade sub-sector expanded for a seventh month (down 1.3 points to 55.5), if slower than August’s six-year high. Wholesale trade (down 1.8 points to 45.4) contracted for a second month after July’s brief expansion.

• Personal & recreation services (up 4.1 points to 45.6) and communications (down 3.7 points to 35.9) continued to contract.

• The input prices sub-index spiked in September (up 6.8 points to 67.3), likely reflecting higher prices for imports due to the lower dollar. The average wages sub-index fell a further 4.2 points to 55.6 after July’s usual seasonal wage increases.

• Selling prices expanded for a third month (largely unchanged at 51.8); recent expansion likely reflects the need to cover higher costs for imported inputs, and the pressure to keep margins tight remains.

A solid report but one evidencing some internal weakness with new orders and employment coming off sharply. I’m thinking that the stimulus effects (think Tony’s tradies) peaked in August and are now coming off fast as volatility rises.

Full report.