Australia's Service Sector has stabilised in the New Year

Getty/ Lisa Maree Williams

There is some positive economic news this morning in the rise in the Australian Industry Group’s Performance of Services Index (PSI) which rose 2.4 points to 49.9 in January.

Granted, that’s still on the wrong side of the 50 expansion contraction line, but the signs are more positive than they have been for a while.

AiG said that “three of the five activity sub-indexes returned to expansion (i.e. above 50 points) in January, with the sales (up 2.6 points to 50.7), new orders (up 1.2 points to 50.7) and employment (up 6.4 points to 51.7) subindexes all ending several months of contraction.” Good news with deliveries only down 0.1% and the 1.3 point fall in stocks not necessarily negative.

AIG CEO Innes Willox was certainly looking at the results as “glass-half-full” noting that:

“Three of the five activity sub-indexes returned to expansion (i.e. above 50 points) in January, with the sales (up 2.6 points to 50.7), new orders (up 1.2 points to 50.7) and employment (up 6.4 points to 51.7) subindexes all ending several months of contraction.”

However, he highlighted that only two sectors, health and community services, and finance and insurance were in deeply positive territory meaning that, “evidence of a
more widespread recovery across both consumer-oriented services and business-to-business services will be needed before we see the more sustained lift in performance that is required”.

The RBA rate cut to 2.25% will help he said, but with “businesses remaining concerned about weak local economic conditions and subdued consumer and business confidence”, it also seems clear that some settling of the government’s leadership issues and a clear and positive direction from Canberra would be a boon as well.

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