The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (Australian PSI®) for March was released this morning, and apart from the finance sector, continues to paint a less than rosy view of that other “bit” of the economy.
Here are the key points:
- The index was up 0.3 points to 47.0 (readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease).
- Finance & insurance and personal & recreational services were the only sub‑sectors to grow in March.
- Accommodation, cafés & restaurants was the worst performing sub‑sector (30.6). Activity also fell sharply in the transport & storage and property & business services sub‑sectors.
- Survey respondents noted low levels of activity across manufacturing and construction sectors as well as the strong Australian dollar as factors affecting growth in services.
- The new orders sub‑index rose 2.1 points to 47.7.
- Employment was 1.4 points higher at 48.9 in March.
- Selling prices sub‑index was 45.7.
Contrary to the recently released retail trades figures, the cafe/restaurant sector was one of the least performing. No surprise that manufacturing and construction remain at low levels, as the report states:
The stellar Australian dollar in particular is punishing all export industries outside mining like tourism, manufacturing and education, and import competing industries. This pattern is underscored by the latest Australian PSI®, with only two (i.e. finance & insurance, and personal & recreational services) of the nine sub‑sectors posting readings above 50.
The bad news is that this pattern of growth is likely to persist through 2012, and into 2013. The Australian dollar is unlikely to substantially depreciate due to the ongoing high terms of trade, and ongoing wide interest rate differentials with currencies of the advanced economies like the US, Japan, the UK and Euroland.
An illustrative chart embedded in the report highlights how our “houses and holes” economy is booming, although it seems the former is giving the middle finger to the rest:
The full report below: