The AIG services PMI is out and has a pretty weird mix. It’s still in recession at 49.3 even though it improved 3.2 points:
The latest seasonally adjusted Australian Industry Group Australian Performance of Services Index (Australian PSI®) improved by 3.2 points to 49.3 points in January.
This was the highest level for the Australian PSI® since March 2013 and the index is edging towards expansion (readings above 50 points). Nonetheless, the Australian PSI® continues to indicate contraction (readings below 50 points) in the services industries, as has been the case over the past 24 months.
The lift in the Australian PSI® in January was driven by a marked improvement in new orders and sales. The new orders sub-index picked up 10.6 points to 53.6 points, signalling the first expansion on this measure since June 2012. The sales sub-index also moved up 2.5 points to be just above 50 points and signalling a net expansion. The remaining activity sub-indexes, however, remained below 50 points this month.
The health and community services and the finance and insurance sub-sectors (63.5 points and 66.9 points respectively, three month moving averages) remained the only two sub-sectors that expanded in the Australian PSI® in January.
Seasonal factors (e.g. Christmas and New Year holidays) and the extreme heat across parts of Australia appeared to have affected the services industries this month more than usual. Abstracting from these, respondents continued to suggest that a lack of confidence, in particular uncertainties surrounding the outlook for the domestic economy, is weighing on business activity. However, there are some green shoots that suggest conditions are improving for a number of services businesses.
The new orders measure bears out a green shoots argument:
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So does the big jump in financial services activity as a leading indicator:
But the only other sub-sector expanding is health:
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.
