Australian PSI: Services sector recovery eases in June

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) fell by 3.4 points to 57.8 in June, indicating positive but easing conditions compared to the record high seen in May (results above 50 points indicate expansion, with the distance from 50 points indicating the strength of the increase).

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Ai Group Chief Executive, Innes Willox, said: “The strong performance of Australia’s services sector continued in June although the rate of expansion eased after the record-setting pace seen in May. Growth was reported from across the sector, with particular strength in business & property services and logistics services including warehousing, transport and importing. Some adverse impacts on demand and supply chains were associated with the COVID lockdowns and restrictions imposed by other states and territories. Businesses were also constrained by an inability to fill positions required either to maintain existing levels of activity or to expand to meet higher demand. Wages growth accelerated in June and input prices continued to rise although at a more moderate rate than in the previous month. The healthy rise in new orders came on top of the sharp rise in the previous month and points to strong demand over coming months. A key question for many businesses will be whether they can fill positions required to fill these orders,” Mr Willox said.

Australian PSI® – Key Findings for June 2021:

  • All five services sectors available in the Australian PSI® indicated expansion in June (see table below). The effects of higher commodity prices and the lift in local manufacturing activity continued to benefit logistics and ‘business services’ businesses, while the results of government stimulus continued to lift demand for business & property services that supply or support residential construction. Discretionary spending and broad-based improved confidence lifted demand across consumer-oriented services, although the Victorian lockdown and activity restrictions in other states had a dampening effect on some of the recovery.
  • All five activity indices in the Australian PSI® showed positive results in June (see table below), although sales (down 2.5 points to 66.1), new orders (down 11.7 points to 56.6) and employment (down 2.4 points to 54.2) all eased from the previous month.
  • The input prices index moderated slightly but remained elevated in June (down 2.7 points to 65.4), marking 12 months of increases following the index’s record low in June 2020. The average wages index continued to climb (up 2.9 points to 66.0 – its highest result since October 2019), indicating increasing wage pressures for services businesses seeking skilled staff. Selling prices moderate after four months of accelerating growth (down 9.9 points to 53.5).

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Seasonally adjusted

Index this month

Change from last month

12- month average

Seasonally adjusted

Index this month

Change from last month

12- month average

Australian PSI®

57.8

-3.4

50.1

Business-oriented services

Sales

66.1

-2.5

50.5

Business & property

62.1

2.5

50.5

Employment

54.2

-2.4

50.2

Logistics

66.2

1.1

47.2

New Orders

56.6

-11.7

50.8

Finance & insurance

na

na

na

Supplier deliveries

54.9

2.4

48.9

Finished stocks

53.7

4.4

48.9

Consumer-oriented services

Capacity utilisation (%)

83.0

-0.8

76.4

Retail trade & hospitality

57.7

-0.4

47.9

Prices and wages

Health & education

58.3

1.5

51.7

Input prices

65.4

-2.7

63.9

Personal, recreational & other

53.8

1.2

53.1

Selling prices

53.5

-9.9

48.6

Average wages

66.0

2.9

56.9

Results above 50 points indicate expansion. Trend indexes in the Australian PSI® are calculated with a Henderson 13-month filter formula.

na: Results are not available for this sector in this period due to unusually low survey response numbers. All sectors are included in the total results.

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Background: The Ai Group Australian PSI® is a leading indicator of services activity in the Australian economy. It is a seasonally adjusted national composite index based on the diffusion indices for sales, orders/new business, deliveries, inventories and employment with varying weights. An Australian PSI® reading above 50 points indicates that services activity is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline. Results are based on a sample of around 200 companies each month.

/Public Release. This material comes from the originating organization/author(s)and may be of a point-in-time nature, edited for clarity, style and length. The views and opinions expressed are those of the author(s).View in full here.