Services sector contracts further in February
Australia’s services sector continues to struggle, contracting further in February with a fall in sales and further job losses.
The Performance of Services Index by the Australian Industry Group and the Commonwealth Bank rose 0.9 points to 48.3 in February, with that still being below the key 50-point level separating growth and contraction.
Finance and insurance performed relatively well, with poor results again in retail trade and consumer facing services sectors.
The chief executive of the Australian Industry Group, Heather Ridout believes the services sector has been impacted negatively by the withdrawal of government stimulus measures and interest rate rises totaling 0.75%.
“The significant degree of consumer caution is clear from the lack of expansion in activity this year in accommodation, cafes and restaurants, personal and recreational services and wholesale trade,” Mrs Ridout said.
“Businesses in these sectors will be looking to the better national employment outcomes of recent months to support an improvement in household discretionary spending in the face of yesterday’s interest rate rise.”
Commonwealth Bank’s senior economist, John Peters mirrored Mrs Ridout’s sentiment, highlighting the loss in confidence in consumers following successive rate rises at the end of last year. He was however broadly optimistic about the services sector in 2010.
“However, ABS data showing strong jobs growth in the broad economy in recent months and suggesting that unemployment has peaked and is now headed lower, augurs well for future growth in consumer demand for services generally.”