Service sector grows again: AiG


by Chris Becker

Following the good news about tourism, now some more on the services front as well today with the AIG PSI report for August expanding for the third consecutive month up to 55.6 points. The lower Aussie dollar is obviously paying off, and while the services sector is the biggest component of GDP, it must be noted that a majority is financial services which is also doing very well off the East Coast housing bubble.

From the source:

Ai Group Chief Executive, Innes Willox, said: “The further expansion in the services sector in August, as indicated by Ai Group’s Australian PSI®, stands in contrast to the slow economy-wide growth recorded by yesterday’s June quarter National Accounts release. This suggests that the economy has strengthened somewhat over the past couple of months and that we are gradually finding sources of growth to balance the further fall in mining-related investment. With new orders for businesses in the services sector recording solid gains, there are good reasons to expect a continuation of services sector expansion over coming months.”


Money points:


• The Australian PSI® expanded for a third consecutive month in August, rising 1.5 points to 55.6 – its highest level since March 2008.

• Three of the five activity sub-indexes expanded: new orders (up 3.9 points to 56.9), services sales (up 4.5 points to 65.4) and employment (up 0.8 points to 52.5).

• Supplier deliveries (down 1.0 point to 50.0) were stable, but stock levels (down 6.4 points to 44.1) returned to contraction.

• The retail trade sub-sector expanded for a sixth month (up 3.0 points to 56.8 – its fastest pace since October 2009), while wholesale trade (down 3.3 points to 47.2) returned to contraction after a brief expansion in July.


• The finance & insurance sub-sector added an eighth month of expansion (up 0.5 points to 65.5), while property & business services (up 3.9 points to 58.5) continued July’s improvement. Health & community services (up 6.2 points to 52.9) returned to growth after two months of mild contraction, while hospitality (up 5.2 points to 51.0) ended three months of contraction.

• All other sub-sectors contracted: personal & recreation services (down 5.0 points to 41.5); communications (up 0.7 points to 39.6); and transport & storage (up 8.9 points to 48.0).

• The input prices sub-index (down 4.0 points to 60.5) fell below its 12-month average of 62.5 points, with prices growth relatively contained since April’s spike. The average wages sub-index fell 4.4 points to 59.8 after July’s usual seasonal increase.


• Selling prices expanded for a second month (down 1.8 points to 51.7), if at a slower pace; the recent expansion probably reflects the need to cover higher imported input costs due to the lower dollar.