PSI recovers some more

The AIG Performance of Services Index is out and:

…increased by 5.3 points in June to 48.8. It remains just below the 50 point level separating expansion from contraction.

• The Australian PSI® shows some encouraging signs that significant parts of the services sector are starting to stabilise after the sharp falls in activity seen so far this year. Five of the nine sub-sectors expanded in June (a reading above 50 points), up from only one in May. The sub-sectors most closely connected with household consumption of goods, such as retail and wholesale trade are clearly continuing to struggle.
• For the services sector as a whole, June marked the first time since August 2011 that both sales and new orders expanded in the same month.
• Despite a pickup in input price growth in recent months, the average selling prices index continued to moderate and is currently at its lowest level since the series began in 2007.
• A number of businesses reported that the carbon tax is already having an impact on their sales and activity levels. Economic uncertainty, weak activity in manufacturing and construction, and the high dollar were also noted as negative influences

So, that’s clearly a nice bounce out of the March trough. I’m not going to put too much store in this, given the drop was one of reasons I got overly bearish a few months ago.

Still, taken on its merits, the index is showing a broad bounce:

And new orders are leading:

We could conclude that this is the front end of a positive effect from rate cuts, though I’m not going to. Here are all sub-components:

Input prices are still strong but wage growth pressure is still easing.

Good news but once burned twice shy with this index.

PSI Report June 2012