Services PMI

The Judo Bank Australia Services PMI (Purchasing Managers' Index), compiled by S&P Global for Judo Bank, tracks monthly change in private services since May 2016. It surveys around 400 services firms, stratified by GDP and workforce size, spanning consumer excluding retail, transport, information, communication, finance, insurance, real-estate and business services. Its headline, the Services Business Activity Index, is a diffusion index, meaning a breadth gauge of change, not output level, GDP or % growth. It excludes manufacturing, retail, sales value, the Composite PMI (combined manufacturing and services gauge) and Ai Group PSI (a separate survey).

Responses compare the reference month with the previous month, using questionnaires collected mid-month or in the month's second half. Each month has a flash (preliminary) estimate in its 3rd week and final estimates early next month, with the manufacturing final before services and composite. Release time is 23:00 UTC, or 09:00 in Sydney the next day, and flash uses around 85% of replies, with the final adding late ones. Underlying survey data are never revised, though seasonal factors may be revised; above 50.0 signals expansion (bullish AUD) while below 50.0 signals contraction (bearish).

The headline has no weights, so these gauges add context rather than feeding a formula.

• New Business Index: captures change in new orders placed, fulfilled or not, the main demand driver.
• New Export Business Index: captures change in new business from abroad, showing external demand.
• Outstanding Business Index: captures change in unfinished work in hand, or backlogs, showing capacity pressure.
• Employment Index: captures change in number of people employed, counting 2 part-time roles as 1 full-time role, ignoring temporary labour.
• Input Prices Index: captures change in average prices paid for purchases, wages, salaries and fuel.
• Prices Charged Index: captures change in average prices charged, or fees per item or time unit.

In July 2020 the seasonally adjusted headline rose to 58.2 from 53.1, its highest since April 2017. New business grew at its fastest pace in three years on domestic reopening, yet export business stayed below 50.0 for a sixth month. Employment fell for a sixth month, backlogs rose marginally for a second month and 12-month expectations stayed positive but dipped. Input prices stayed above 50.0 while prices charged fell marginally, squeezing margins, so a high headline does not mean every part improved.

1. Replies: Collect "higher", "same" or "lower" versus the previous month for each variable.
2. Diffusion formula: Compute Index as (% reporting higher) + 0.5 × (% reporting same), on a 0-100 scale.
3. Headline: Apply that formula to the business-activity question on activity volume (gross income or chargeable hours), with no further weighting.
4. Seasonal adjustment and 50.0 rule: Seasonally adjust each index, then read against 50.0, where 50 means higher replies equal lower replies. Above 50.0 means more firms expanded than contracted, while below means more contracted.
5. Illustrative example: Suppose 30% report higher, 50% same and 20% lower, then Index = 30 + 0.5 × 50 = 55.0 before seasonal adjustment. Since 55.0 exceeds 50.0, activity expanded, but this does not mean 55% growth.