Now the services PMI craters

From the AIG comes the second August PMI to hit a brick wall, this time services:

The Australian Industry Group Australian Performance of Services Index (Australian PSI® ) fell by 8.9 points to 45.0 points in August. This was the lowest reading of the Australian PSI® since November 2014 and marks a return to contraction after three months of growth (results above 50 points indicate expansion, with higher numbers indicating a stronger rate of expansion).

 All five of the activity sub-indexes in the Australian PSI® fell below 50 points in August. Sales (43.7) fell 15.7 points, stocks (44.4) fell 8.4 points, employment (43.5) fell 6.5 points, new orders (47.5) fell by 4.7 points and deliveries (46.1) fell 8.4 points to 46.1 points.

 Five of the nine services sub-sectors in the Australian PSI® expanded in August (three month moving averages and thus reflecting their performance over June-July-August rather than for the month of August only). These included finance and insurance (55.1), retail trade (55.0) personal and recreational services (54.5), communication services (52.4) and wholesale trade (51.9). The giant health and community services sub-sector (49.9) remained broadly steady over the month. Contraction was evident in property and business services (46.1), accommodation, cafes and restaurants (43.2), and transport and storage (32.9), which reached a record low for this sub-sector.

 Respondents to the Australian PSI® suggested the usual winter lull may have been deeper and longer this year, with no major events, product launches or announcements to bolster confidence and consumption. Any boost to consumer spending arising from the conclusion of the Federal election in July appears to have passed quickly.

Fascinating. What could be causing this slump in activity? Shares have been rising. Property has been mixed. Economic outcomes have not changed much. All I can put it down to is politics, a post-election slump following a another paralysed government:

Full report.