Australian PSI®: Mixed conditions for services in October

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Ai Group Chief Executive, Innes Willox, said: "The Australian services sector reported mixed fortunes in October with business & property services; retail trade & hospitality; and, to a lesser extent, personal, recreation & other services all reporting further slowing while both the logistics and health & community services sectors set off on more expansionary paths. Across the services sector, sales and employment were higher in October while new orders were discouragingly low. A more robust recovery was inhibited by lingering activity restrictions, barriers to interstate movement and the same disruptions to the supply of inputs that are being felt in other parts of the economy. Services companies reported further strong rises in input prices and wages with selling prices also rising although not by enough to prevent additional pressure on margins. Service sector businesses will be hoping that the further unwinding of COVID restrictions and a burst of sales as the holiday season approaches, will lift the sector and see it enter 2022 from a position of strength," Mr Willox said.

Australian PSI® – Key Findings for October 2021:

• The business-oriented sectors in the Australian PSI® reported mixed results in October (see table below) with most respondents reporting some impact from lockdowns in Victoria and state border restrictions nationwide. Logistics (up 6.4 points to 56.4) saw an increase in demand for freight transport and related services and reported positive conditions for the sector, while business & property services fell by 10.1 points to 34.6 – a second month of contraction following six months of recovery from the lows of 2020.
• Among consumer-oriented sectors, health, education & community services reported positive conditions in October (up 27.9 points to 52.1) as demand for these services rose, while retail trade & hospitality (up 6.1 points to 34.9) and personal, recreational & other services (up 5.7 points to 48.7) reported an easing in decline.
• Of the five activity indices in the Australian PSI®, employment improved further (up 4.8 points to 56.8) and the sales index rose substantially from decline into growth (up 13.8 points to 55.2). New orders (down 1.0 points to 38.8), supplier deliveries (down 7.5 points to 39.5) and finished stocks (down 13.7 points to 39.8) all contracted at accelerating rates.
• The input prices index jumped to its highest level since October 2008 (up 9.1 points to 73.6) – a 16th month of input price increases after a record low for the index in June 2020. The selling prices index accelerated and was positive for an eighth month (up 7.8 points to 61.7), indicating more businesses passed on rising input costs to their customers. The average wages index also accelerated (up 9.1 points to 68.3), indicating wage pressures increased following two months of reduced pressure.

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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.

Media Enquiries: Tony Melville: 0419 190 347