• The Australian Industry Group Australian Performance of Services Index (Australian PSI® ) fell by 0.9 points to 54.0 points in February 2018 (seasonally adjusted), indicating a softer rate of expansion compared to January 2018. Australian PSI® results above 50 points indicate expansion, with higher numbers indicating stronger rates of growth. February 2018 marked one year of positive results for the Australian PSI® (seasonally adjusted), the longest such run since March 2008 (18 months).
• All five of the activity sub-indexes in the Australian PSI® expanded (results over 50 points) in February 2018. New orders (54.8) and sales (54.7) lifted slightly over the month. Following a strong month in January employment fell back to 53.9 in February, similar to levels seen in the latter part of last year. Deliveries also expanded over the month but fell slightly from 53.7 to 53.0; while stocks (52.7) returned a similar result as January 2018.
• Capacity utilisation dropped back to 78.0%, down from 81.1% in January but remained above the long-term average of 75.6%.
• The Australian PSI® was positive across most sectors in February. Six of the nine sub-sectors expanded (wholesale, transport, finance, property & business, health, and personal and recreational services), two were approximately stable (hospitality and communication) and one contracted (retail).
• While there was generally a positive experience over the month, businesses continue to note that higher energy prices and increased costs of compliance lead to higher input costs, which continue to eat into margins and constrain profitability.
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.
