Australian PSI®: Services disrupted by lockdowns in August

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Ai Group Chief Executive, Innes Willox, said: "Increased COVID-19 cases and the lockdowns aimed at constraining the spread of the virus saw the performance of the services sector slump in August. The 6.1 percentage point fall in the Australian PSI® was driven by a sharp fall in sales, fewer deliveries, and a drop in new orders. The epicentre of the downturn was in the retail trade & hospitality sector with the logistics sector also going backwards in August. Business & property services and personal, recreational & other services managed to hold onto recent gains. Businesses held onto staff despite the reversal in fortunes, no doubt mindful of the difficulties they have experienced filling positions in the opening six months of the year. With lockdowns in Victoria, the ACT and NSW set to continue this month and with new orders down on previous levels, the immediate outlook is for another weak month or two. In the meantime, a lot hinges on the healthy supply of vaccines, success in overcoming hesitancy about vaccination and clear and convincing leadership from across the National Cabinet," Mr Willox said.

Australian PSI® – Key Findings for August 2021:

• The business-oriented sectors in the Australian PSI® were stable or contracted in August (see table below) with most respondents reporting some impact from lockdowns in Victoria and NSW and border restrictions nationwide. Logistics (down 6.6 points to 46.9) saw a fall in demand for freight transport and related services and reduced access to sites as a result of lockdowns.
• Among consumer-oriented sectors, retail trade & hospitality reported large falls in activity (down 3.7 points to 23.1) as lockdowns in Victoria and NSW greatly diminished demand. Businesses that had previously reported demand from home improvement customers noted slower demand from that segment in August
• Four of the five activity indices in the Australian PSI® contracted in August (see table below), with only employment growth remaining positive for a fifth month (up 2.4 points to 53.4). The sales index contracted further (down 13.2 points to 40.0) after six months of solid growth ended in July, while new orders shrank (down 9.3 points to 47.4) after almost a year of recovery and in the wake of a series high in May 2021.
• The input prices index moderated but remained elevated in August (down 2.6 points to 71.5), marking 14 months of increases following the index’s record low in June 2020. The selling prices index slowed but remained positive for a sixth month (down 11.4 points to 55,3), indicating that fewer businesses were able to pass on rising input costs to their customers. The average wages index decelerated (down 5.0 points to 63.0), indicating a slight easing in wage pressures.

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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