I don’t place a lot of stock in the AIG PSI. Its registry of service sector activity never seems to correlate with broader economic data. Note, for instance, the weakness throughout 2010 and then greater strength across 2011 which is the opposite to what you’d expect as the post-GFC services sector stimulus of 2010 faded into two-speed growth in 2011. Nonetheless it’s worth reporting on and registered a solid jump in January:
- The services sector lifted in January following three consecutive months of decline, with the latest seasonally adjusted Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (Australian PSI®) increasing 2.9 points to 51.9.
- The Australian PSI® was supported by solid growth in activity in the hospitality, finance & insurance, personal & recreational services sub-sectors.
- Conditions in the sector remain patchy however, with activity expanding in only three of the nine services sub-sectors in January, unchanged from December, and significant declines in activity (on a seasonally adjusted basis) reported in the wholesale trade, property & business and communication services sub-sectors.
- In six of the nine sub-sectors a majority of businesses reported deeper discounting of selling prices compared to a year ago.
Here are the sub-sectors:
Finance and recreation. The latter makes sense in January. It’s too early for any corroborating evidence for finance. There was also decent jumps in new orders and employment, the latter being especially good news. However, the NAB Survey has a much better record as a guide to activity and, at this stage, remains subdued, especially in the employment index.
Full report below.
