Two reasons why Australia’s Services Index hit low levels




The Australian Industry Group Australian Performance of Services Index (Australian PSI®) is indicative of the services activity in the Australian economy, and this index fell 8.9 points to 45 during August 2016 which is below the 50 points level and much below the 53.9 points of July 2016. This is the weakest performance from November 2014. It is to be noted that a reading above 50 points indicates that services activity is generally expanding. Overall, there has been a slip in all five activity sub-indexes – Sales falling 15.9 points to 43.7, new orders falling -4.7 points to 47.5, employment slipping 6.5 points to 43.5, stocks falling 8.4 points to 44.4 and supplier deliveries dropping 8.4 points to 46.1. Thus, there is a need to have confidence-building measures in order to steer productivity while reducing costs. However, key factors impacting the index largely are:

kunalsa1 (1)

Falling transport and storage activity: The weak transport and storage performance has hurt the index level which lost over 0.6 points to 32.9 indicating a major contraction. As a result, investors are concerned over the economy as transport sector is indicative of the production and trade performance in the country. Moreover, the performance of the sector was weak even though the fuel prices remain subdued. This decline thus mainly is due to the slowing demand from mining and commercial construction and retail trade customers.


Australian PSI® (Source: The Australian Industry Group)

Slowing retail and other sectors performance: Despite transport and storage, there are other major core sectors which have also showed a slow performance. Retail trade lost 10 points to 55 during August. Other major sectors like finance and insurance fell 6.9 points to 55.1 points. Accordingly, investors are concerned that this weak consumer confidence might be an indicator of weakening economy. Other factors like falling manufacturing sector survey, decline in retail sales levels, coupled with challenging property market in terms of volumes, are adding to the concerns of a potential slowdown in the economy.

kunalsa1 (1)

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. and associated websites are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.



Leave a Reply