PSI pops!

The AIG Performance of Services (PSI) is out this morning and will give the cyclically-focused more to crow about:

The latest seasonally adjusted Australian Industry Group Australian Performance of Services Index (Australian PSI®) jumped by 5.8 points to 55.2 points in February.

• This was the first expansion for the Australian PSI® (a reading above 50 points) since January 2012 and the highest reading since March 2008.
• Despite the strong result in the Australian PSI® this month, growth was concentrated in just a few services sectors, primarily health and community services (67.7 points) and finance and insurance (67.0 points). Both of these sub-sectors have been performing more strongly than other services sub-sectors over the last six months, and both are relatively large – and therefore statistically dominant – in the Australian PSI®.
• Other sub-sectors improved but remained below 50 points. The large retail trade subsector moved very close to stabilising at 49.5 points (in 3 month moving averages).
• Feedback from respondents in many services sector indicates that local demand conditions remain challenging for a large number of services businesses and the outlook continues to be fragile for them.
• All of the activity sub-indexes of the Australian PSI® moved above 50 points in February. The sales sub-index rose to its highest level (58.8 points) since October 2009, while the new orders sub-index pointed towards a second month of expansion. Services employment also expanded in February following two months of contraction (readings below 50 points). In addition, both the supplier deliveries and stocks sub-indexes strengthened to above 50 points this month, suggesting businesses were replenishing their stock levels after the Christmas/New Year trading period.

That’s a much more decisive jump out of recession than we’ve seen in many months. However, as the AIG itself says, it’s very narrow, with expansion confined to just health and finance:

I’ve got no reason for the jump in health and community services. Perhaps attending ailments is the first phase of purse loosening. Finance could rightly be seen as a leading indicator for a broadening of activity but that hasn’t been the case over the previous three years.

Here are the internals:

More evidence of cyclical bounce and perhaps a hint of broadening. It’s good to see some momentum in services as we head into the capex cliff. At least now it’s a little bit of a contest.

Full report here.