Lockdowns stall service industry activity in September: Ai Group

Australia’s services sector contracted for a second month in September as COVID lockdowns in south east Australia continued.

Ai Group released its Australian Performance of Services Index (Australia PSI) last week which found whilst the index rose by 0.1 points to 45.7 points (seasonally adjusted) in September 2021, it did mark a second month of contraction in 2021 following a good recovery earlier in the year.

Results below 50 points indicate contraction in the Australian PSI with lower numbers indicating a stronger contraction.

The report found that ongoing lockdowns in Victoria, NSW and border restrictions elsewhere continued to affect customer demand for a large proportion of Australian PSI respondents in September.

Business oriented services continued to be impacted, but the largest effect was again seen in the retail, hospitality, recreational and personal consumer-oriented sectors located inside the lockdown zones, the report found.

Many respondents reported their “plans were on hold” while waiting for restrictions to ease. The report also found some businesses are increasing their inventory and plan to increase employment, in preparation for an anticipated spike in sales when restrictions ease. It also points out that others are “building inventory in response to supply shortages and seeking local suppliers to protect supply chains”.

With restrictions now lifting in NSW, it is hoped these services sectors will notice an uplift which will in turn benefit the printing sector.

Ai Group Chief Executive, Innes Willox, said: “Restrictions associated with the delta outbreaks in south eastern Australia were the major contributor to the continued contraction of the Australian services sector in September.

“Retail trade & hospitality dominated the downturn while business & property services also contracted as did personal & recreational services.

“The logistics sector saw competing forces balance gains and losses in the steady overall performance. Despite lower sales and a further contraction in new orders, employment held up pointing to an expectation that activity will rise as restrictions are eased. While predictions are highly conditional, we are expecting a mild upturn in October followed by further gains as restrictions are eased in line with higher levels of vaccination.”

You can read the full report here.

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