The Australian Industry Group’s (AIG) Performance of Services Index (PSI) for June has been released, and the news is disheartening.
According to the Index, the services sector contracted for the fourth consecutive month, falling 2.3 points in June to 47.6 points, which is below the 50 point level separating expansion from contraction (see next chart).
According to AIG:
The deterioration in the Australian PSI was evident across all the activity sub-indexes, which were all below 50 points this month. The sales, new orders, supplier deliveries and stocks sub-indexes moved below 50 points after indicating a mild expansion last month.
Three of the nine sub-sectors in the Australian PSI expanded in June. Growth remains concentrated in health and community services (62.0 points) and finance and insurance (64.7 points, three month moving averages). Accommodation, cafes and restaurants (54.3 points) expanded in June, for the first time since April 2013. The sub-indexes for retail trade (46.5 points) and the closely related wholesale trade sub-sector (46.6 points) stayed below 50 points in June, indicating ongoing contraction in these industries (three month moving average).
Ai Group Chief Executive, Innes Willox, said: “Conditions in the services sector slipped again in June with respondents to the latest Australian PSI survey suggesting that ongoing weakness across much of the domestic economy and the public reception of the Federal Budget are dampening consumer and business confidence. With both the sales and new orders sub-indexes pointing to contraction, it appears likely that it will take several months at least to recapture the momentum that was building earlier in the year in the services sector.
“Several respondents indicated that the further deterioration in manufacturing conditions in recent months is reducing demand for business-to-business services such as accounting, IT and personnel services while poor results for the retail, wholesale and transport & storage sub-sectors pointed to further weakness in household spending,” Mr Willox said.
As noted above, the internals also sucked, with all broad categories contracting:
With seven of the 10 sub-indices also falling in seasonally adjusted terms:
Full report here.
