Australia's services industries have taken the first growth step in a patchy recovery

Photo: Getty Images

The services sector has expanded in Australia for the first time in 12 months, a further indication of a gradual recovery.

Australian PSI, the Australian Industry Group Australian Performance of Services Index, improved by 1.8 points to 51.7 in February.

Growth was patchy. Three of the five sub-indexes expanded, with new orders up 2.8 points to 53.5 and employment up 2.8 points to 54.6 expanding for a second consecutive month.

Supplier deliveries also grew, up 4.9 points to 51.5, after eight months in negative territory.

However, sales across services businesses contracted, down 2.2 points to 48.6, after a brief expansion in January.

Stock levels, up 2.1 points to 48.1, spent a ninth consecutive month in contraction, below the 50 mark on the index.

Innes Willox, AI Group Chief Executive, says the lift in activity and the gradual recovery in momentum in the services sector over recent months is encouraging.

“However, the pattern of growth remains patchy,” Willox says. “Health, community and financial services are enjoying strong conditions and the pick-up in residential building activity over the past year and a lower Australian dollar have boosted demand for certain services (tourism, real estate). Yet, more generally respondents to the Australian PSI continue to raise concerns about weakness in the local economy and the ongoing fragility of consumer and business sentiment.”

The rapid decline in mining construction, difficulties in manufacturing and a general lack of willingness to invest are dampening demand for business services.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.