Services PMI fades again

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From the AIG:

123The Australian Industry Group Australian Performance of Services Index (Australian PSI® ) began 2016 on a low note, with an Index result of 48.4 points in January (results below 50 points indicate contraction, with lower numbers indicating a larger contraction).

• This was the fourth consecutive month of contraction for the Australian PSI® , after a promising but short-lived period of expansion through the middle of 2015. This disappointing deceleration reflects the fragile and fragmented nature of economic growth at present.

• Of the five of activity sub-indexes in the Australian PSI® , only supplier deliveries (51 points) was above 50 points and showing expansion in January. Sales were stable at 50.2 points.

• Just two of the nine services sub-sectors in the Australian PSI® grew in January; health and community services plus personal and recreational services. Health and community services remains the strongest sector of growth in the Australian PSI® in January 2016. Hospitality (hotels, cafes and restaurants) was stable for a second month, after growing for four months.

• The wages sub-index in the Australian PSI® fell to 49.5 points in January. This was the lowest result for this sub-index since June 2009 and the first time since 2009 it has fallen into contraction (below 50 points). Selling prices stabilised (50.3 points) after falling in November and December. Input pricing remains relatively elevated, presumably due to the impact of the low dollar on imported inputs for retailers, wholesalers and others.

• Pockets of growth in the Australian PSI® continue to be limited to consumer-oriented subsectors other than retail and wholesale trade. In the business-to-business sub-sectors, activity is patchy outside the sub-sectors benefiting directly from capital city housing activity.

Internals are weakish:

5

Finance and banks are off pretty hard:

6

And employment is sinking again:

8

Not a great report.

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.