PSI fugly

The AiG Performance of Services Index for May is out this morning and the news is discouraging:

The latest seasonally adjusted Australian Industry Group/Commonwealth Bank of Australia Performance of Services Index (Australian PSI®) fell by 3.5 points to 40.6 points in May (readings below 50 points indicate contraction).

• This was the lowest monthly reading of the Australian PSI® since April 2012 and the second-lowest level since the GFC-related slump in 2009.
• The weak demand environment is particularly evident in pricing, with the Australian PSI® index of selling prices falling to 42.2 points, its lowest level since this series began in October 2007.
• Since March, sales and new order levels in household-oriented services sub-sectors have lost momentum. In particular, the activity indices of the retail trade and hospitality sub-sectors both fell in May to their lowest levels so far this year. This reflects deteriorating consumer and business sentiment and seems to be occurring despite the latest RBA interest-rate cut in May (and following a series of interest rate cuts since 2011).
• Activity in business-orientated sub-sectors has not yet been able to fill this gap. These services noted a recent curtailment in equipment maintenance and repairs and reduced client demand.
• Businesses also said the decline in activity in May partly reflected an increased mood of uncertainty arising from the Federal Budget and the upcoming Federal election.

That’s a trend busting drop and is across the internals. By sector:

In new orders:

In employment:

In everything:

Ever since the end of the housing driven economy in early 2010, this index has become volatile and less reliable. But it sure isn’t heading in the right direction.

psi report may final.pdf by Tamara Rice