The Australian Industry Group Australian Performance of Services Index (Australian PSI® ) stalled for a second consecutive month in November, falling 0.7 points to 48.2 points this month (readings above 50 points indicate expansion, with the distance from 50 points indicating the strength of expansion).
• This mild contraction interrupts a mostly positive performance through 2015, with the Australian PSI® indicating expansion in six of the eleven months so far this year.
• All five of activity sub-indexes in the Australian PSI® were below 50 points in November.
• Four of the nine services sub-sectors in the Australian PSI® grew in November. This suggesting growth remains patchy and fragile. Conditions still vary significantly across subsectors, with ongoing weakness in communications and wholesale trade.
• Respondents to the Australian PSI® suggested that consumer spending remains cautious and fragile, with some respondents indicating that recent rises in mortgage interest rates by the major banks are already detracting from local household spending. Weaker activity in the retail and hospitality sub-sectors in the Australian PSI® in recent months may be reflecting this influence, with many respondents describing trading conditions as ‘flat’ or ‘steady’.
• Other respondents indicated that the strength of housing market activity is boosting demand for a range of housing-related services to consumers in NSW (e.g. property, professional and financial services), but the influence of this trend appears to be muted elsewhere.
• In the business-to-business services sectors, activity is patchy outside the housing market, with fewer large commercial or engineering projects in the pipeline to support sales. Corporate travel and hospitality spending are also said to be down, for this time of year.
The fading employment index is the big one. 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.
