The AIG Performance of Services Index in Australia tumbled to 44.3 in January of 2019 from 52.1 in December, pointing to the first contraction in the services sector since February of 2017 and the sharpest since 2014. Big declines were seen in sales (-13.8 to 39.3), new orders (-12.6 to 45.4) and selling prices (-3.9 to 47). Also, employment remained in contraction territory (+2 to 47.5) and average wages eased (-7.4 to 55.2). Retail trade and increasingly, wholesale trade, are the weakest services sectors in early 2019. Several other key services sectors also appear to be slowing. Services businesses reported weak customer demand in January due to drought conditions in some areas of Australia, a decline in building activity for others and a deterioration in consumer spending. Services PMI in Australia averaged 50.27 Index Points from 2003 until 2019, reaching an all time high of 63 Index Points in June of 2018 and a record low of 32.50 Index Points in February of 2009.
Services PMI in Australia is expected to be 53.50 Index Points by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Services PMI in Australia to stand at 51.20 in 12 months time. In the long-term, the Australia Performance Services Index is projected to trend around 52.20 Index Points in 2020, according to our econometric models.