S&P Global Services PMI

What is S&P Global Australia Services PMI?

Compiled by S&P Global and sponsored by Judo Bank, the survey polls around 400 private services firms grouped by sector and size to mirror GDP. Collection started in May 2016 and covers consumer services excluding retail, transport, information, communication, finance, insurance, real estate, and business services. The headline Business Activity Index measures month on month change in activity volume, such as gross income or chargeable hours. It excludes manufacturing, mining, agriculture, construction, retail volumes, and the public sector.

When is it released and what happens each release?

Responses are collected in the second half of each month and compare that month with the prior month. The final is released in the first week of the next month at 09:00 Sydney time, with dates shifting for holidays, as each release states. Manufacturing arrives earlier, the Composite PMI, a GDP-weighted blend, arrives with the final, and a flash from 80% to 85% of replies lands mid month. Replies are never revised, but seasonal adjustment factors may be, and 50 splits expansion from contraction, with distance from 50 showing pace.

What moves S&P Global Australia Services PMI?

The headline reflects activity alone, while sub indices, separate scores per question, reveal demand, capacity, jobs, and prices.

• Business Activity: captures month on month change in activity volume, such as gross income or chargeable hours.
• New Business and New Export Business: capture change in local order volumes and orders from abroad, a gauge of demand.
• Outstanding Business: captures work in hand not yet completed, a sign of capacity pressure.
• Employment: captures month on month change in staffing levels.
• Input Costs and Prices Charged: capture change in average cost burdens and in selling prices and fees.
• Future Activity: captures expected activity in 12 months, a gauge of sentiment not current conditions.

In July 2020 the Business Activity Index rose over 5 points to 58.2 from 53.1 in June, its highest since April 2017. New Business grew at its fastest pace in 3 years and backlogs rose for a second month. Employment fell for a sixth straight month and export orders stayed below 50 for a sixth month after April's record contraction. Input costs rose on wages, fuel, and a weak exchange rate while prices charged fell on discounting, and expectations stayed positive but dipped.

How is S&P Global Australia Services PMI calculated?

1. Ask: Panel members report for each variable whether the level is higher, the same, or lower than 1 month ago.
2. Weight: Replies are weighted by sector and company size shares of sector GDP, giving weighted %Up, %Same, and %Down.
3. Diffusion index: Each index equals %Up plus half of %Same, on a 0 to 100 scale where 50 means no change. For example, 32% higher, 48% the same, and 20% lower gives 56.0. If the prior month was 52.0, activity expanded in both months but faster in the 56.0 month.
4. Seasonal adjustment: Indices are adjusted for recurring seasonal patterns using Census X-12 ARIMA plus an in-house method.
5. Headline: The headline is the seasonally adjusted Business Activity index with no averaging, and the flash repeats it on 80% to 85% of replies.

Key point: A fall from 55.0 to 52.5 still means expansion in both months, only slower growth in the second. The Services Business Activity Index matches the Manufacturing Output Index only, never the 5-component headline Manufacturing PMI.