Aussie Services Industry Doing It Tough

By Fn Arena News | More Articles by Fn Arena News

The Australian Industry Group(AIG)/Commonwealth Bank (CBA) Performance of Services Index (PSI) recorded a flat 49.5 reading in January, the third consecutive month the index has recorded a reading below 50.0, the level that separates expansion from contraction in the economy.

The bank notes the drought and last November’s rate increase were factors in the outcome, as both contributed to difficult business conditions throughout much of the economy and led to weak activity readings across a range of both consumer and business related sectors.

Sectors to gain included communications, retail trade and transport and storage, while falls were recorded in health and community services, personal and recreation services and finance, insurance, property and business services.

On the positive side the bank notes sales and new orders reversed declines of the previous two months to record moderate gains, while both employment and deliveries turned down after flat growth in December. Stocks of finished goods were run down substantially in January, but input costs showed some signs of moderating after the gains of last month.

This rundown in stocks contributed to a fall in deliveries, with only two sectors recording gains compared to seven in December. It also helped drive down the inventories sub-index, which recorded a fall of 11.9 points to 46.6 points, thus reversing the strong gains made last month.

While sales gained it was in only three sectors, compared to increases in six sectors in December. New orders jumped by 6.1 points to 51.9, reversing last month’s sharp decline. In contrast employment numbers look weak, with the bank noting only two sectors recorded gains in January, down from five in December.

The AIG/CBA PSI index reading of 49.5 for January compares to a reading of 52 in October prior to the last increase in interest rates and is down from the 56.3 reading in April prior to the Reserve Bank of Australia’s action in increasing official interest rates.