The latest seasonally adjusted Australian Industry Group Australian Performance of Services Index (Australian PSI®) inched 0.8 points higher to 47.9 points in October.
This was the highest level for the Australian PSI® since March 2013 (49.6 points), but it remains below the 50 point mark that separates expansion from contraction in this survey.
The Australian PSI® has been below 50 points since January 2012, which is its longest run of continuous contraction since this data series commenced in 2003.
The slight improvement in the Australian PSI® in October was driven by a lift in supplier deliveries (indicating expansion in the month at 51.0 points) and a small improvement in the employment sub-index (up to 48.1 points, but still indicating mild contraction). The activity sub-indexes for sales and new orders fell slightly in October and remained below 50 points.
Among the sub-sectors that make up the Australian PSI®, the health and community services sub-sector and the finance and insurance sub-sector expanded in October (56.1 points and 50.7 points respectively, three month moving averages).
The selling prices sub-index improved by 3.5 points to 51.0 points in October. This prices sub-index moved into expansion (over 50 points) for the first time since October 2011.
Businesses noted that customer confidence has improved modestly in September and October following the Federal election, but they also noted that consumers remain reluctant to spend on local discretionary goods and services. Local business-to-business spending is still reported to be slow, although some businesses are noticing a more positive mood.
The internals are arguably worse with new orders down, stocks and deliveries up:
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.
