The Australian Industry Group service PMI is out this morning and continues to disappoint the rebalancing optimists. It barely budged from its deep recessionary conditions in June coming in at 41.5 points and showed broad-base softness that bodes poorly for the future:
The latest seasonally adjusted Australian Industry Group / Commonwealth Bank of Australia Performance of Services Index (Australian PSI®) rose by 0.9 points in June to 41.5 points (readings below 50 indicate contraction).
Over the past four years, the Australian PSI® has been lower than the level recorded in June in only two other months: May 2013 (40.6 points) and April 2012 (39.6 points).
Businesses in most household-oriented sub-sectors are yet to report any signs that recent interest rate cuts have helped boost sales. Personal & recreational services was the only sub-sector in this group to expand in June.
The activity indices of the retail and hospitality sub-sectors both suggest that activity declined further in June and, in three month moving average terms, are at their lowest levels this year.
Business-oriented sub-sectors are also struggling. Wholesale trade and transport & storage were among the worst performing service sub-sectors in June, reflecting weak levels of demand from retail, manufacturing and construction businesses.Given the recent peak and apparent decline in mining investment activity, and a (sub-trend) GDP growth rate of just 2.5% in Q1 2012, these results indicate a widening ‘growth gap’ in this second quarter of 2013.
Anyone not sobered up by that is just not paying attention. 200bps of cuts have done nothing (except prevent deterioration). As said, the weakness is broad based:
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Sales are awful:
Employment is mired:
There was ray of hope in the slightly higher reading for new orders up 3.6 points to 41.8 but overall the index is paralysed:
More and more the Australian services sector resembles that in the US or UK with a permanent hibernation broken only by a brief Christmas thaw.
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.
