Australias Service Sector Still Contracting, Though Slower Now

Published Date : Aug 05, 2014

The Australian Industry Group has remained in contraction for five months, after reporting a Performance and Services index of 49.3 in July. The service business index needs to be above 50 to become an expanding sector.

Expansion in the sales and new orders sectors improved the Australian Industry Group’s standing from 47.6 in June. The new index which stands at 49.3 in July still marks the service industry in a reduced rate of contraction. Reports point to businesses avoiding hiring new employees and increasing capitals.

Innes Wilcox, the Chief Executive of the Australian Industry Group, responded with being optimistic, owing to the growth in sales and new orders indices, and stated that the businesses should start picking up. The slump in mining-related construction and the past fall-off in business services demand are becoming less relevant.

Sub-sectors responsible for the recent growth are health and community services (59.6 points), accommodation, cafes and restaurants (61.1 points), finance and insurance (64 points). Their expansion has been shadowed by the continuing contraction in stocks, employment, and supplier deliveries, keeping the index under 50.

Service businesses are still searching for stronger evidence of growth before they become willing to hire more staff.

The Ai Group states that the survey also indicates a reduced consumer demand, due to uncertainties regarding federal budget measures.

Innes Wilcox said the services sector in Australia is currently easing into a growth phase after a few years of weakness. Australian businesses still seem cautious with a view of the economic outlook.