• The Australian Industry Group Australian Performance of Services Index (Australian PSI®) fell 3.4 points to 53.0 in August (seasonally adjusted). This signaled continuing growth, but at a more moderate pace than in July and with a greater variation in activity across the sub-sectors. Australian PSI® results above 50 points indicate expansion, with higher numbers indicating stronger rates of growth relative to the previous month.
• Four of the five activity sub-indexes in the Australian PSI® were above 50 points and indicating growth in August (seasonally adjusted). Sales grew in August but at a slower rate than July (down 6.8 points to 53.5 points). New orders and employment also grew at a slower pace, falling to 54.2 points and 52.5 points respectively. Stocks (inventory) built up at a faster pace in August, with this sub-index rising to 54.9 points. Supplier deliveries were broadly stable in August (49.7 points) after growing in previous months. Capacity utilisation hit a record high in the Australian PSI® of 81.4% of available capacity being utilised across the services sector in August.
• Seven of the nine sub-sectors in the Australian PSI® expanded in August (trend) with results above 50 points. Two sub-sectors hit record highs (trend); the relatively small personal and recreational services sub-sector rose to 67.6 points and communications services rose to 61.4 points. Activity in finance and insurance (61.5 points) accelerated, as did wholesale trade (57.5 points), transport and storage (55.4 points) and health and community services (52.5 points). Property and business services decelerated to a more modest rate of expansion (51.2 points).
• At the other end of the performance range and indicating very reluctant discretionary spending by consumers, activity in retail trade shrank at a worse rate in August (down by 1.1 points to 42.1 points), as did activity in the hospitality sector (accommodation, cafes and restaurants, down by 4.5 points to 38.5 points).
• Respondents to the Australian PSI® in the business-to-business sub-sectors noted positive demand from the construction and mining sectors, particularly in the east coast states. Respondents in retail and hospitality are reporting reluctant spending due to flat income growth, adverse winter weather and relatively poor consumer confidence.
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.
