Good News - Australia's massive services sector is expanding

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Some positive news this morning with the release of the AiGroup’s performance of services index (PSI). This index, which is the Australian version of the HSBC/Markit services PMI’s — released globally today and tonight — showed that while the PSI dipped back 1.5 points, the print of 50.2 kept it on the right side of the 50 expansion/contraction level.


But the good news in the release is that retail trade has expanded 2.9 to 52.6. This is the first time this sector has been on the growth side of 50 – expanding – since September 2014.

That is unequivocally good news.

AiGroup also said that while only 3 of the 5 activity sub-indexes grew “service sales, patchy over recent months, returned to expansion,” with a gain of 4.1 points to 52.6.

AiGroup CEO Innes Willox was enthusiastic in his comments on the index. He said:

The lift in the services sector for the second consecutive month is a welcome early sign of a much-needed broadening of growth in the economy. Both the health & community services and the finance & insurance sub-sectors have been expanding for a number of months and in March they were joined by the personal & recreational services and retail sub-sectors. Added confidence can be taken from the further lift in new orders and employment in the sector.

Maybe lower interest rates and the wealth effect of housing and the stock market are finally starting to gain traction in the economy. Certainly domestic final demand should be about to accelerate if historical relationship holds.

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