The services sector has continued its downward trend, ending another quarter with a low note, according to the findings in the latest Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (Australian PSI).

 

The index recorded a 0.5 per cent contraction, ending the month at 41.9 basis points, where readings below 50 record a contraction with the distance from 50 indicative of the strength of the decrease.

 

The services sector was hamstrung by ongoing weakness in manufacturing and construction, with businesses citing uncertainty in the mining sector as a key factor affecting activity. nly two of the nine services sub-sectors - health & community services and accommodation, café & restaurants - expanded in September.

 

“Conditions in the services sector continued to deteriorate in September reinforcing the need for yesterday's interest rate cut. This easing in monetary policy should help build momentum behind the tentative signs of improvement this month in activity in health & community services and accommodation, cafes & restaurants,” Australian Industry Group (AI Group) CEO Innes Willox said.

 

Commonwealth Bank Chief Economist, Michael Blythe said: "The services sectors indicate the divided growth rates being experienced across the economy. Some of the consumer facing areas have firmer growth, with household incomes lifted by Government assistance and lower interest rates. We expect another RBA rate cut in coming months which could further lift household disposable incomes.”

 

The key findings of the report include:

  • The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (Australian PSI®) registered 41.9 in September - down 0.5 points on the previous month (readings below 50 represent a contraction in activity with the distance from 50 indicative of the strength of the decrease).
  • September marked the eighth consecutive month of contraction for the Australian PSI®.
  • At 36.9 the new orders sub-index is now in line with the low levels recorded during the global financial crisis.
  • While accommodation, cafes & restaurants (58.9) was the best performing sector in September - communication services (32.4) and transport & storage (31.4) continued to struggle.
  • Employment across the sector continued to contract (48.4).
  • Input prices (66.8) and wages (58.4) expanded in September.

 

The full report can be found here