The Australian Service Sector Is Still A Long Way From Healthy

Picture: The Weinstein Company, MGM

The Australian Industry Group (AiG) this morning released their Performance of Services Index which showed an improvement of 0.8 to 47.9.

But, crucially, services are still in the contraction zone below the 50.

AiG chief executive, Innes Willox, said:

October saw further signs of the services sector clawing back towards growth. However, conditions remain fragile with slippage in both sales and new orders recorded after a promising recovery in September illustrating that weak consumer demand is holding back growth.

Which of course suggests that even though recent Australian data has been printing stronger and suggesting a more optimistic outlook for the economy, it’s less universally positive in the economy than recent data might have suggested..

Of particular interest, after retails sales bounced 0.8% last month as reported yesterday by the ABS, the respondents to the AiG survey are more dour than expected. AiG noted that as we run up to Christmas,

consumer oriented services sub-sectors including retail trade (45.1), wholesale trade (43.2), accommodation, cafes and restaurants (40.0) and personal and recreational services (44.3) continue to reflect weak consumer demand for local goods and services; insecurity over employment prospects; and on-line purchasing from abroad stimulated by the high Australian dollar.

Services are clearly moving in the right direction, but equally clear is the fact there is still a long way to go before the sector can be considered healthy.

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