The Australian services sector was shrinking at the fastest rate since the GFC in July, and conditions worsened again again in August, driving the Performance of Services Index down to a new low.
The Australian Industry Group’s PSI fell 0.4 points to 39.0 in the month. Readings below 50 represent a contraction; this is the second month the PSI has fallen below 40 outside of the GFC.
Ai Group reported today that despite low interest rates and a falling AUD, consumers were keeping a lid on discretionary spending, so demand for retail goods, entertainment services and hospitality was low.
Business-related demand was also down thanks to low confidence and weak activity in the manufacturing and construction sectors.
The sector shed jobs again for the fifth consecutive month, and selling prices remained low. Meanwhile, input costs rose with the falling AUD.
“Despite a slight improvement in new orders in August, the reading of under 40 points suggests a meaningful recovery in activity is still some way off,” Ai Group CEO Innes Willox said.
As with last month’s PSI, Willox said many Australians had put the brakes on spending in the lead up to the election this Saturday.
“One in five respondents also pointed to uncertainty around the federal election as further undermining consumer confidence and services sector activity,” he said.