The Australian Industry Group Australian Performance of Services Index (Australian PSI® ) lifted by 1.8 points to 51.5 points in May, indicating expanding activity across the services sector after approximately stable results in the previous two months (results above 50 points indicate expansion, with higher numbers indicating a stronger rate of expansion).
• Of the five activity sub-indexes in the Australian PSI® , sales (51.7 points) and stocks (51.2 points) lifted into positive territory in May while new orders (55.3 points) continued its expansion. Deliveries (49.1 points) and employment (49.1 points) were both stable to slightly negative.
• Four of the nine services sub-sectors in the Australian PSI® were stable or expanded in May (three month moving averages). The strongest subsectors were retail trade (61.5 points) finance & insurance (58.8 points) and health & community services (53.2 points). Property & business services remained roughly steady at 49.2 points. The business-oriented sectors of communication services (44.5 points), wholesale trade (44.2 points) and transport & storage services (43.7 points) further contracted in the month while the household and tourismoriented sectors of accommodation, cafes & restaurants (42.3 points) and personal & recreation services (39.1 points) experienced a large deterioration in May.
• The input costs (59.8 points) sub-index of the Australian PSI® remained in expansion in May possibly indicating further price rises for imported products due to the stronger dollar earlier in 2016. Selling prices (49.0 points) and wages (50.3 points) were stable, reflecting the lowinflation environment at present and indicating that margin pressures continue to be a concern for many services businesses.
• Respondents noted that seasonal weather changes may have had a positive effect on retailers and some other services businesses this month. However, softer economic conditions (particularly in some regional areas), uncertainty about the upcoming Federal election and the fluctuating dollar continue to have a dampening effect for others.
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.
