Another horrible services PMI print has just been released in Australia with the AIG performance of services index rising 0.2pts to 43.8 in November. While an improvement, the gauge sits well below the 50 level that separates expansion with contraction with the 6-month trend looking decidedly ill considering where it was midway through the year.
Looking at the report in detail gauges on deliveries, stocks and employment all improved, although all three remain below the 50 level, while that for new orders and sales, indicators of both present and future demand, fell to 42.3 and 41.1 points respectively. On a sector-by-sector basis only two of nine recorded an expansion – health and community along with personal and recreational services, whilst those most closely aligned with households and business all contracted.
Given the importance of this sector to the Australian economy, it’s by far the largest in terms of size and employment, this is a worrying survey indeed, particularly as it follows an equally-poor result for October. As stated by the AIG ‘respondents raised ongoing concerns about the weak local economy, fragile consumer and business sentiment, slower growth in household disposable income, the continuing decline in mining construction activity, and the flat manufacturing industry’. A very ugly looking outlook indeed.