The Australian Industry Group Australian Performance of Services Index (Australian PSI® ) lifted by 2.6 points to 53.9 points in July. This was the third consecutive month of expansion and indicated a stronger rate expansion in activity across the services sector (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 (59.4 points) lifted by 6.6 points in July, the strongest reading since August 2015. Deliveries (54.5 points) rose by 6.0 points and stocks (52.8 points) gained 6.2 points. New orders (52.2 points) were steady (up 0.4 points from June), while Employment (50.0 points) dropped by 3.1 points, indicating stable employment in July.
Three of the nine services sub-sectors in the Australian PSI® expanded in July (in three month moving averages) and two were stable. Retail trade (65.0 points); finance and insurance (62.0 points) and communication services (53.2 points) expanded in July. The very large health & community services (50.2 points) and property & business services (49.1 points) sub-sectors were stable in July. Wholesale trade (48.9 points), personal & recreational services (46.7 points), hospitality (40.3 points) and transport & storage (33.6 points) all contracted, with transport services recording its weakest conditions since 2013.
The input costs (55.3 points) sub-index of the Australian PSI® fell by 8.0 points in July, suggesting prices continued to increase but at a slower pace than in June (possibly due to Australian dollar fluctuations). Selling prices (52.4 points) went up in July, for the first time since October 2015, while wages (49.4 points) were roughly stable in July.
Respondents noted that the uncertain period leading up to the Federal election on 2 July may have had a lingering dampening effect on business activity in July. For retailers, an unusually cold and wet winter is a proving to be a positive influence on winter sales.
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.
