Australia Services PMI back into expansion

Australia Services PMI (May) came in at 51.5 vs 49.7, according to the Australian Industry Group Performances of Services Index for May, noting that following 2 months of contraction, the index is now back into expansion.

Key points

• Of the five activity sub-indexes sales (51.7 points) and stocks (51.2 points) lifted into positive territory in May while new orders (55.3 points) continued its expansion. Deliveries (49.1 points) and employment (49.1 points) were both stable to slightly negative

• Four of the nine services sub-sectors were stable or expanded in May (three month moving averages). The strongest subsectors were retail trade (61.5 points) finance & insurance (58.8 points) and health & community services (53.2 points). Property & business services remained roughly steady at 49.2 points. The business-oriented sectors of communication services (44.5 points), wholesale trade (44.2 points) and transport & storage services (43.7 points) further contracted in the month while the household and tourismoriented sectors of accommodation, cafes & restaurants (42.3 points) and personal & recreation services (39.1 points) experienced a large deterioration in May

• The input costs (59.8 points) sub-index remained in expansion in May possibly indicating further price rises for imported products due to the stronger dollar earlier in 2016. Selling prices (49.0 points) and wages (50.3 points) were stable, reflecting the low inflation environment at present and indicating that margin pressures continue to be a concern for many services businesses

• Respondents noted that seasonal weather changes may have had a positive effect on retailers and some other services businesses this month. However, softer economic conditions (particularly in some regional areas), uncertainty about the upcoming Federal election and the fluctuating dollar continue to have a dampening effect for others.