Sluggish winter for services sector

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source: http://www.abc.net.au

By finance reporter Rebecca Hyam

Activity in Australia's services sector shrank for the fourth month in a row in August, with the uncertainty about a hung parliament and the fading effects of stimulus measures weighing on demand.
The latest Performance of Services Index by the Australian Industry Group and the Commonwealth Bank rose slightly to 47.5 last month.
That is still below the critical 50 point level which indicates expansion, but the modest increase suggested the pace of decline eased slightly in August.
Sub-sectors including accommodation, cafes and restaurants were flat during the month, while retail trade contracted again.
Activity in communication services, wholesale trade, and finance and insurance expanded, but not enough to boost the broader service industry's overall performance.
There was also a slump in supplier deliveries and selling prices and that was particularly bad news for personal and recreational services, as well as health and community services.
Australian Industry Group chief executive Heather Ridout says the industry's sluggish performance in recent month reflects the volatile nature of the broader economic recovery.
"Although there are some promising signs among the services sub-sectors, the sector as a whole is yet to feel the full benefits of the gradual re-emergence of private sector demand," she said.
Commonwealth Bank senior economist John Peters says the latest services index result is consistent with some official economic data released earlier this week.
"The latest national accounts revealed retail spending by consumers (roughly 40 per cent of total household spending) edged up by just 0.3 per cent in the June quarter," he said.
"In contrast the non-retail areas of household spending expanded by 2.3 per cent in the same period."
But he says things should improve over the next 12 months.
"We think that households, buoyed by ongoing labour market strength, a falling unemployment rate, and gifted with real wage increases, and likely rising asset prices in the year ahead, will become more confident and relaxed about the future," Mr Peters said.

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the industry's sluggish performance in recent month reflects the volatile nature of the broader economic recovery