Australia's Services Sector Is STILL Contracting

The Australian Industry Group Australian Performance (AiG) of Services Index (PSI) is out and the bad news for the sector and the economy is that it remains stuck in the mud, unable to materially increase from its 14-month low in October.

The PSI rose just 0.2 points to 43.8 in November which is the ninth consecutive month of contraction since the services sector’s last expansion in February 2014 – before the budget and the crisis of confience currently gripping the economy.

The really bad news for services is that the AiG said:

All activity sub-indexes remained below 50 points this month, suggesting a weak outlook for services businesses in the upcoming Christmas trading period.

Both the sales (down 3.9 points to 41.1) and new orders (down 1.6 points to 42.3) sub-indexes contracted for a third consecutive month, while supplier deliveries (up 2.9 points to 42.1) and stock levels (up 5.0 points to 42.6) have now spent six months in negative territory. More positively, the employment sub-index increased by 2.7 points to stabilise at 49.5.

In a note accompanying the release, AiG CEO, Innes Willox, said:

The services sector remained disturbingly weak in November, reflecting fragile consumer and business sentiment, slower growth in household disposable incomes, the continuing decline in mining construction, flat manufacturing activity and contracting public sector spending.

He added that, “there are some threads of growth channeling into the services sector from the current strength in residential and, to a lesser extent, commercial construction, but these have not been sufficient to counter the factors weighing negatively on the sector.”

Today the ABS will release what is hoped to be a solid Q3 GDP number at 11.30am but this PSI suggests there is still a long way to go before the economy re-balances in the manner the RBA wants and we all need.

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