ID :
39128
Tue, 01/06/2009 - 16:39
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http://m.oananews.org//node/39128
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Services activity slows for ninth month
Big rate cuts and the federal government's pre-Christmas splurge could not lift Australia's services sector from ongoing difficulties in December, a survey says.
The Australian Industry Group - Commonwealth Bank performance services index, based on a poll of 200 firms, rose 1.5 points to 39.3 points in December.
This was off November's record low 37.8 index points, with the pace of contraction in activity slowing.
A reading below 50 points indicates activity is contracting.
Only one of the nine service sectors had expanding activity in the December survey, health and community services, compared with none the previous month.
Australian Industry Group chief executive, Heather Ridout, said the services sector was starting the new year in a difficult environment.
New orders and supplier deliveries reflected the tough conditions with both sectors falling for a ninth consecutive month, she said.
"This ongoing uncertainty is encouraging services firms to further rely on existing inventories to meet current demand," she said.
Sales activity fell for the seventh month in a row, although at a slower pace.
"More cautious discretionary spending in the wake of the global credit crisis lead to further decreases in sales in the retail trade and accommodation, cafes and restaurants sectors," the survey said.
Ms Ridout said the Reserve Bank of Australia's (RBA) aggressive cuts to the cash rate and the federal government's $10.4 billion stimulus package would help the services industry.
But more maybe needed to boost the local economy, she said.
"The results suggest that the Reserve Bank will need to revisit interest rates and make further cuts in early 2009," Ms Ridout said.
Commonwealth Bank senior economist John Peters said the continuing weak services sector vindicated the RBA cutting the cash rate by three percentage points, to 4.25 per cent, since September.
"The Australian PSI data also helps signpost more significant RBA policy easing in early 2009," he said.
Mr Peters forecasts the RBA to have lowered the cash rate by one percentage point to 3.25 per cent by April.
A weak services sector will keep hindering the local economy despite stimuli in the economy.
"These factors include sharply lower interest rates, lower petrol prices and the weaker Aussie dollar and should cushion the local economy from downside risks," he said.
"But a period of paltry growth and rising unemployment lie ahead in 2009."
All states had falling activity, although the pace of contraction deteriorated only in New South Wales and Western Australia.
The Australian Industry Group - Commonwealth Bank performance services index, based on a poll of 200 firms, rose 1.5 points to 39.3 points in December.
This was off November's record low 37.8 index points, with the pace of contraction in activity slowing.
A reading below 50 points indicates activity is contracting.
Only one of the nine service sectors had expanding activity in the December survey, health and community services, compared with none the previous month.
Australian Industry Group chief executive, Heather Ridout, said the services sector was starting the new year in a difficult environment.
New orders and supplier deliveries reflected the tough conditions with both sectors falling for a ninth consecutive month, she said.
"This ongoing uncertainty is encouraging services firms to further rely on existing inventories to meet current demand," she said.
Sales activity fell for the seventh month in a row, although at a slower pace.
"More cautious discretionary spending in the wake of the global credit crisis lead to further decreases in sales in the retail trade and accommodation, cafes and restaurants sectors," the survey said.
Ms Ridout said the Reserve Bank of Australia's (RBA) aggressive cuts to the cash rate and the federal government's $10.4 billion stimulus package would help the services industry.
But more maybe needed to boost the local economy, she said.
"The results suggest that the Reserve Bank will need to revisit interest rates and make further cuts in early 2009," Ms Ridout said.
Commonwealth Bank senior economist John Peters said the continuing weak services sector vindicated the RBA cutting the cash rate by three percentage points, to 4.25 per cent, since September.
"The Australian PSI data also helps signpost more significant RBA policy easing in early 2009," he said.
Mr Peters forecasts the RBA to have lowered the cash rate by one percentage point to 3.25 per cent by April.
A weak services sector will keep hindering the local economy despite stimuli in the economy.
"These factors include sharply lower interest rates, lower petrol prices and the weaker Aussie dollar and should cushion the local economy from downside risks," he said.
"But a period of paltry growth and rising unemployment lie ahead in 2009."
All states had falling activity, although the pace of contraction deteriorated only in New South Wales and Western Australia.
