Australian Services sector strengthened in July

In BICSI Bytes by

The Australian Industry Group Australian Performance of Services Index (Australian PSI) lifted by 2.6 points to 53.9 in July, indicating a stronger rate of expansion in activity in the services sector’s third consecutive month in positive territory (results above 50 points indicate expansion, with the distance from 50 points indicating the strength of the expansion).

Commenting on the findings, Australian Industry Group (Ai Group) Chief Executive, Innes Willox said: “A very strong showing by the retail sub-sector and healthy expansion in finance & insurance and communications services, together with a broadly stable health services sub-sector, boosted the pace of growth in the broader services sector in July. Conditions were less buoyant in other sub-sectors including transport & storage, hospitality and personal & recreation services, which all went backwards in the month. As long as lower rates are passed on by the banks, the decision yesterday by the Reserve Bank to reduce interest rates should provide a boost to business and consumer demand in these lagging sub-sectors.”

Key findings from July Australian PSI report:

  • Of the five activity sub-indexes – sales (up 6.6 points to 59.4), deliveries (up 6.0 points to 54.5), stocks (up 6.2 points to 52.8) and new orders (up 0.4 points to 52.2) – all expanded strongly, while employment was stable (down 3.1 points to 50.0).
  • Three of the nine services sub-sectors expanded (in three-month moving averages): retail trade (down 1.5 points to 65.0); finance & insurance (down 4.8 points to 62.0); and communication services (up 8.5 points to 53.2).
  • The very large health & community services sub-sector was stable (up 0.8 points to 50.2), while transport & storage services (down 2.6 points to 33.6) recorded its weakest conditions since April 2013.
  • The input prices sub-index dropped 8.0 points to 55.3 – its lowest reading since November 2014 – reflecting weaker inflation more generally. Selling prices recovered somewhat, rising 7.8 points to 52.4, marking the first increase in prices across the services sector since October 2015.