Expansion in the services sector was interrupted in October 2015, after four months of expansion. The seasonally-adjusted Australian Industry Group Australian Performance of Services Index (Australian PSI® ) dropped by 3.3 points to 48.9 points this month, signalling a mild contraction (readings above 50 points indicate expansion, with the distance from 50 points indicating the strength of expansion).
• Other than this interruption, conditions across the services sectors have been mostly positive in 2015. The three-month average Australian PSI® still indicates expansion, at 52.3 points in October.
• Only two of the five activity sub-indexes in the Australian PSI® were above 50 points in October; sales and supplier deliveries. Services employment contracted for a second month, while both new orders and stock levels fell this month.
• Six of the nine services sub-sectors in the Australian PSI® grew in October. This suggests positive trading conditions are becoming more broad-based. Conditions still vary significantly across sub-sectors, with ongoing weakness in communications and wholesale trade.
• Respondents to the Australian PSI® indicated that a lower Australian dollar and low interest rates are benefitting local tourism, retail and other consumer services. Solid housing market activity continues to benefit a range of household services in NSW and to a lesser extent elsewhere. More business-to-business oriented sub-sectors are showing tentative signs of growth, although a lack of appetite for investment is dampening on demand for their services.
• The extra public holiday in Victoria for the first time in October this year, which was confirmed at short notice, disrupted activity across a range of consumer and business services nationally. The disruption was compounded due to the timing of this new holiday, just before public holidays in other states the following week.
This is the third marginal indicator to weaken sharply in October – the PMI and D&B being the others – most concerning is the weakening in employment in all three. Full report.
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.
Expansion in the services sector was interrupted in October 2015, after four months of expansion. The seasonally-adjusted Australian Industry Group Australian Performance of Services Index (Australian PSI® ) dropped by 3.3 points to 48.9 points this month, signalling a mild contraction (readings above 50 points indicate expansion, with the distance from 50 points indicating the strength of expansion).
• Six of the nine services sub-sectors in the Australian PSI® grew in October. This suggests positive trading conditions are becoming more broad-based. Conditions still vary significantly across sub-sectors, with ongoing weakness in communications and wholesale trade.
