The second of Australia’s PMI’s, this one for services, is out and is sinking fast:
The seasonally adjusted Australian Industry Group Australian Performance of Services Index (Australian PSI®) declined by 1.8 points to 43.6 points in October, the lowest reading since August 2013. The Australian PSI® has now contracted for eight consecutive months (readings below 50 points indicate contraction). The three-month moving average for the Australian PSI® moved lower to 46.1 points in October, the lowest level in a year.
• All of the activity sub-indexes in the Australian PSI® were below 50 points (i.e. contraction) this month. In particular, both supplier deliveries and stock levels contracted at their fastest pace since August 2013, suggesting a weak outlook for the upcoming crucial Christmas trading period by services businesses. The sales and new orders sub-indexes contracted for a second month in October. The employment sub-index also indicated contraction following a brief expansion in September.
• Only two out of the nine services sub-sectors showed mild expansion this month (above 50 points, three month moving averages), including accommodation, cafes and restaurants (50.5 points) and personal and recreational services (51.0 points). The very large health and community services sub-sector stabilised (49.9 points, three-month moving averages) in October, following an unusual contraction in conditions last month. Both the wholesale and retail trade sub-sectors, as well as business oriented services sub-sectors, contracted this month.
• Respondents to the Australian PSI® continued to raise concerns about the weak state of the local economy, the ongoing decline in mining construction activity and the manufacturing industry, as well as slow growth in household disposable income and
subdued consumer sentiment.
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.
