The Australian Services Sector Is Still Shrinking, According To June PSI Data

Australia’s services sector has contracted for the 17th consecutive month, albeit at a slower rate than in May.

The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (PSI) rose 0.9 points from May’s 13-month low to 41.5 points in June.

Personal and recreational services and communication services were the only two sub-sectors to improve.

Retail prices fell for the 19th consecutive month as “businesses continue to discount in order to stimulate sales volumes”, the AiG and CommBank reported.

Jobs were cut from businesses in the wholesale trade, transport and storage and property and business service sub-sectors, although finance and insurance and communications businesses grew slightly.

Average wages rose slightly, but at the lowest rate of growth since 2010, the AiG and CommBank reported.

“Non-mining sectors are battling ongoing strong negative headwinds from substantial fiscal tightening at the Federal and State levels, as well as the historically high – albeit recently softening – Australian dollar,” CommBank senior economist John Peters said.

“Ongoing fragility of sentiment in households and businesses and weakness in many non-mining sectors of the economy are key reasons why we think the RBA will move again to cut the official cash rate by another 0.25%, to 2.5%.”

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