Australia Services Sector Down in the Dumps

Australia’s services sector remains “disturbingly weak”, as consumers and businesses save their pennies.

Only health and community services and personal and recreational services expanded in November, while all other segments of the sector contracted, figures from the Australian Industry Group on Wednesday show.

The Performance of Services index failed to rebound from a 14-month low in October, lifting just 0.2 points to 43.8 last month.

The result was below the 50 level that separates expansion from contraction.

The index has been in contraction for nine consecutive months and the outlook for Christmas trading isn’t looking good, the report said.

“The services sector remained disturbingly weak in November,” Ai Group chief executive Innes Willox said.

“The Australian economy remains stuck in the slow lane and there are very few signs of the broader front of growth that will be required to rebalance the economy as mining investment and commodity prices retreat.”

The weakness was being driven by fragile consumer and business confidence and slower growth in household disposable incomes, Mr Willox said.

Declining mining construction, flat manufacturing activity and less public sector spending were also having an impact.

“There are some threads of growth channelling into the services sector from the current strength in residential and, to a lesser extent, commercial construction, but these have not been sufficient to counter the factors weighing negatively on the sector,” he said.

Despite stronger housing activity, households were still unwilling to spend more, amid slower wages growth and concerns about employment, the report said.

Uncertainties around government policy were also taking a toll, it said.

The report follows last week’s official capital expenditure figures which showed the services sector experienced its biggest lift in almost four years in the September quarter, rising 5.5 per cent.

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