AIG Performance of Services index for July in at 49.3, up 1.7 points

  • prior was 47.6

Key points:

  • Sales and new orders sub-indexes moved to slightly above 50 points in July
  • Despite the improvement in sales and new orders, services businesses continued to reduce supplier deliveries and stock levels, with the supplier deliveries sub-index moving up by 3.3 points to 47.8 in July, signalling a mild contraction
  • Wages sub-index rose by 6.9 points to 64.6 points in July, reflecting the 3% increase in the national minimum and award wage rates, as well as the increase in the Superannuation Guarantee rate to 9.5% that took effect from 1 July
  • Retail trade sub-index was mostly unchanged in July, decreasing by 0.5 points to 46.0 points, indicating further contraction in the retail industry, which last expanded in June 2011
  • The wholesale trade sub-sector index moved lower in July, falling 3.1 points to 43.5 – the lowest level since October 2013 (three month moving averages). This sub-sector has now contracted for 33 consecutive months
  • The accommodation, cafes and restaurants (‘hospitality’) sub-sector expanded strongly for a second month in July, rising a further 6.8 points to 61.1 – the highest level since May 2007 (three month moving average)
  • The giant health and community services sub-sector continued to expand in July, although its sub-index declined by 2.5 points to 59.6 points (three month moving averages)

Ai Group Chief Executive, Innes Willox:

  • “The services sector is hovering on the cusp of growth, with the Australian PSI® hinting at the long-awaited expansion in activity that is needed to make up for the weakness in the sector over the past couple of years.
  • Businesses will be encouraged by the pick-up in sales and new orders.
  • This could be a sign that uncertainties over Budget measures and the fall-off in demand for business services connected to slowing mining-related construction are fading in relative importance.
  • At this stage, however, services businesses will need more solid evidence of an uplift and they are not yet at the point of adding staff”

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The AIG Performance of Manufacturing index for July came out on Friday