Australian PSI: Decline in activity for services industries subsides in July

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) rose by 12.5 points to 44.0 points in July 2020 (seasonally adjusted) indicating another contraction in activity in July but at a slower pace than in June. This slower rate of contraction follows three months of exceptionally low results in the Australian PSI®, including a record low in April (results below 50 points indicate contraction, with lower numbers indicating a stronger pace of decline).

This month’s Australian PSI® survey was conducted prior to ‘Stage Four’ activity restrictions being announced for Greater Melbourne.

The Australian PSI® continued to indicate contraction in three of the six services sectors in July. Retail trade & hospitality recovered mildly in July, with the first monthly result above 50 points since February. Insufficient businesses were available to respond in two sectors in July. All activity indicators remained negative in July and all except inventories contracted at a slower pace. Business inventories contracted at a faster pace in July.

Activity restrictions now vary substantially across Australia. Easing restrictions lifted local demand and activity in some but not all locations. Some respondents reported a lift in sales in July due to easing restrictions and government stimulus. A handful of businesses reported better discretionary spending from customers who have drawn down from their superannuation. Nationally however, the majority of businesses reported that consumer demand remained subdued in July due to uncertainty, tighter household income and falling employment. Business-oriented respondents (in business services, logistics and finance) continue to be disrupted by supply chain delays and lower customer demand.

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