Australian services PMI craters in January

From the AIG:

Business-oriented services sectors: The only business-oriented sector of the Australian PSI® to expand in January was property & business services, which improved slightly from December. Finance & insurance and transport & storage experienced slightly negative conditions. The wholesale trade sector reported firmly negative conditions, with particularly weak sales, new orders and employment in January. No results were available this month for the communications sector.

Consumer-oriented services sectors: Retail trade contracted sharply in January with negative (and deteriorating) results for sales, new orders and employment. The other three consumer-focused sectors were positive. The personal, recreational & other services sector accelerated in January, while hospitality (cafes, restaurants and accommodation services) and the very large health, education & community services sector continued to grow, but at a slightly decelerating pace.

Services wages and prices: The input price index expanded in January (63.2 points) but at a slower rate than in December (66.8 points) and slightly below the long-term average for this index (64.0 points). Average wages continued to rise (55.2 points) but at a slower pace than in the previous two months. The average wage index has been trending down since its recent peak in May 2018. The selling prices index indicated contraction in January, following a stable month in December (seasonally adjusted). This marked a seventh month of flat or falling selling prices for services sector businesses.

Services activity: Four of five of the activity indexes in the Australian PSI® were negative and indicated contraction in January, while one expanded. Inventories saw a mild increase as sales contracted, along with new orders and deliveries. Employment also shrank in January but the pace of decline eased compared to December.

Services highlights: The Australian PSI® contracted in January following 22 months of positive conditions. It has been trending down (and indicating a gradual slowing) since its recent peak in the middle of 2018. Business-oriented respondents are now facing tighter conditions than consumer-facing businesses, although expansion in the consumer sectors has weakened. Capacity utilisation in the Australian PSI® fell by half a percentage point to 76.8% of available capacity in January. This is just above the long-run average of 76% but down from the average across 2018 (79.7%).

Services concerns: Retail trade and increasingly, wholesale trade, are the weakest services sectors in early 2019. Several other key services sectors also appear to be slowing. Services businesses reported weak customer demand in January due to drought conditions in some areas of Australia, a decline in building activity for others and a deterioration in consumer spending. The lower Australian dollar increased competition for local businesses and increased costs for those using imported inputs.

It’s not the most reliable index in the world but it sure ain’t well. Full report.

There is some corroboration from CBA service PMI though not so dramatic:

The Australian service sector shifted down a gear at the start of the year as a slower upturn in new work weighed on business activity. Steady international demand supported the expansion, but domestic markets slowed. Hiring growth also eased. However, optimism in the year ahead was sustained while backlogs accumulated at a solid pace. Inflationary pressures meanwhile moderated noticeably at the beginning of 2019.

But the CBA version is new and has never contracted.


  1. Who cares we can still sell third world immigrants pr and passports and high rises so who needs to manufacture anything