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    Australian Services PMI reverts to expansion

    The services sector picked up speed to cross back above the 50 threshold, to denote a more positive outlook for the broader economy as it follows the manufacturing and construction PMIs. 

    View related analysis:
    Australian Trade balance beats expectations
    Australian GDP the highest since 2012

    Services PMI was the third set of positive data for Australia, following on from recent trade balance and GDP reads. At 51.5, the services PMI is at an 8-month high and saw the largest monthly increase in 3-months. However, whilst the expansion is positive we would like to see continued strength ahead as it has printed five contractions over the past seven months. The 6-month average has also expanded but remains in the contraction zone at 49.7. 

    Within the sub-indices it was 'new orders' which led the pack at 56, followed by sales and stocks. Employment and deliveries remained below 50 at 94.1 to make it the ninth consecutive contraction. 

    With both services and manufacturing now expanding we keenly await to see if the construction follows suit. After contracting for five consecutive months, construction PMI between Nov-Dec '15 the construction sector has now expanded for the last two. At 51.5, the sector's rate of expansion is now its highest in seven months and appears to be following the lead provided by the manufacturing PMI sets, which accelerated to a 14yr high back in March.

    Whilst today's data set is another positive for Australia, the services sector needs to continue picking up pace in order to replenish lost growth from the mining sector. Whilst trade balance and GDP data this week has proven positive, it doesn't change longer-term concerns we have for the Australian economy, whose growth hinges on global demand for its export markets. With Iron Ore seemingly in free-fall and inflation expectations so low, the services sector is going to have to pick up pace rather quickly to help growth and inflation further down the track. 

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