Australian PSI: New orders lift services sectors over the summer period

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Innes Willox, Chief Executive of the national employer association Ai Group, said: "Although patchy and in the face of considerable adversity, the performance of Australia’s services sector rose over the December-January period with sales, employment and new orders all growing compared with November. This rebound in performance followed a slump in the months affected by the Delta outbreaks in the south-east corner of the country and points to a partial recovery from the September quarter fall in GDP. It points also to considerable resilience and continuing difficulties as the sector transitions to living with COVID while confronting staff shortages and supply chain disruptions. Strong performances in the business & property services, logistics and health & education industries contrasted with the steeper contractions experienced by retail & hospitality and personal, recreation & other services businesses over the summer. Businesses reported a slight easing of input price and wages pressures compared with November while selling prices rose indicating a belated and partial recovery of earlier cost rises. The rise in employment, while encouraging, came alongside numerous reports of the unavailability of staff and appears likely to reflect businesses hiring staff to cover for the workforce impacts of the Omicron wave," Mr Willox said.

Australian PSI® – Key Findings for December 2021 and January 2022:

• Among business-oriented services sectors in the Australian PSI®, property & business services reported strong demand following five months of fairly weak results (up 15.0 points to 57.0) while logistics expanded in December and January but at a slower pace than November (down 7.1 points to 54.6).
• Among consumer-oriented services sectors, the retail & hospitality sector contracted (down 7.3 points to 34.5) with hospitality businesses particularly affected by the COVID-19 Omicron variant. The personal, recreation & other services sector was similarly impacted (down 6.0 points to 41.5) while the large health, education & community services sector expanded and improved from November as respondents noted a surge of pent-up demand lifted the activity of health & education providers (up 7.1 points to 70.0).
• All five activity indices in the Australian PSI® expanded in December and January (see table below), with new orders (up 10.5 points to 57.9), supplier deliveries (up 11.0 points to 51.4) and finished stocks (up 8.6 points to 51.1) all rising from contraction in November to expansion in December and January.
• The input prices index increased slightly in December and January (up 0.8 points to 66.1), marking a solid year of increases following a record low in June 2020. The average wages index moderated (down 2.9 points to 56.9) following stronger results around the middle of 2021. The selling prices index expanded again, marking a year of increases to selling prices. Taken together, these indexes indicate some increase in inflation 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.

* The monthly data for the Australian PSI® in December 2021 and January 2022 are combined into one data release that describes two months of survey participation (released on 7 February 2022).

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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