Services activity accelerates in September underpinned by property market and tourism

3 October 2003

Service-sector activity accelerated in September according to the latest Australian Industry Group – Commonwealth Bank Australian Performance of Services IndexTM (PSITM).

The improvement was underpinned by the completion of the recovery in tourism-related sectors from the earlier SARS-driven downturn. As well, conditions in property and business services, health and community services; communication services; and (to a lesser extent) wholesale trade sectors improved.

The Australian PSITM rose 3.6 points to 59.1 in September - the highest reading in eight months (a reading above 50 represents expansion, with the distance from 50 indicative of its strength).

Commonwealth Bank Chief Economist Michael Blythe, said the September Australian PSITM result indicates that the services sector, Australia’s largest sector, continues to support domestic growth.

"A strong services sector has helped insulate the domestic economy over the past year from the effects of a weak global economy and the drought. With downside risks to growth remaining, a strong services sector remains critical for Australia’s growth prospects going forward. From that perspective, the strength in the forward-looking components such as orders and employment is particularly encouraging."

The Australian PSITM is based on feedback from 220 typical companies across all sectors, and is the most up-to-date monthly indicator of performance and trends in the services industry.

Ai Group Deputy Chief Executive, Heather Ridout, said continued growth in domestic services would provide impetus to a manufacturing sector currently grappling with global weakness and competitive pressures.

"The strength of services activity is good news for industry, particularly at a time when weak global demand continues to bite, the Australian dollar trades at higher levels, and as manufacturing continues to tread water. Due to the linkages between services and manufacturing, robust services activity could provide the stimulus needed to lift manufacturing growth to a higher level."

Other key findings from the September 2003 Australian PSITM were:

  • All Australian PSITM component indexes rose in September, with improved employment trends (up 6.9 points) accounting for almost half of the September rise.
  • The sales index rose 3.6 points to 63.0, with orders (up 2.7 to 62.3), stocks (up 2.1 to 54.1) and deliveries (up 0.9 to 53.9) also strengthening.
  • The strongest sector readings (above 60 points) were recorded in the accommodation, cafes and restaurants; property and business services; and (despite some easing) the personal and recreational services sectors.
  • Activity in the health and community services; retail trade; communication services; transport and storage; and (to a lesser extent) wholesale trade sectors strengthened in the month.
  • Activity in the finance and insurance sector was little changed and that in the personal and recreational services sector eased.