More Worry About Tax Increases In The Budget As The Services Sector Shrinks Again In April

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The services sector slowed further in April with the Australian Industry Group Australian Performance of Services Index (PSI) weakening by 0.3 points to 48.6.

Readings below 50 indicate a contraction in activity.

Just two of the nine services sub-sectors expanded in April with the health and community services sector registering 63.3 points and finance and insurance also expanding at a healthy rate of 65.4 points.

Sales in the services sector fell relatively steeply (to 44.6 points) and new orders (49.8) and employment (47.7) fell again in April.

Australian Industry Group Chief Executive, Innes Willox, says the contraction in sales, new orders and employment suggests the overall economy is struggling to find alternative sources of expansion to offset the impacts of the slowdown in mining-related investment.

“Respondents to the Australian PSI this month continued to express concerns over potential spending cuts and tax increases,” he says.

“There is clearly apprehension in the business community that next week’s Budget will stifle economic activity.”

Key Findings for April:

  • The Australian Industry Group Australian Performance of Services Index (Australian PSI®) continued to contract in April dropping 0.3 points to 48.6 in April (readings below 50 indicate a contraction in activity).
  • The sales sub-index of the Australian PSI® dropped 5.1 points sharply in April to 44.6 points, the lowest reading since August 2013.
  • Following three months of expansion, the new orders sub-index moved 2.0 points lower to 49.8.
  • At 65.4, the finance & insurance services sub-sector was the strongest performer in April.
  • The communications sub-index recorded the lowest reading – declining by 3.3 points to 41.2. Respondents’ citied uncertainty around changes to Government broadband and IT policy as hindering demand.
  • Services selling prices strengthened in April – moving into mild expansionary territory at 50.1
  • Input prices registered 60.7.

The latest seasonally adjusted Australian Industry Group Australian Performance of Services Index:

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