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Services Sector Remains Flat but Still at Subdued Levels

Services Sector Remains Flat but Still at Subdued Levels
Jun 03, 2015 By Matthew Dibb

Conditions in the services sector were mostly flat from April to May, according to the Australian Industry Group’s Performance Services Index (PSI). The index moved downward from 49.7 points in April to 49.6 points in May, slightly below the 50-point mark that separates growth from contraction. The index is mostly flat but still in the subdued sub-50 range of contraction. In February and March, the index was just barely above the 50-point mark.

The three month moving average for the PSI fell by 0.7 points to 49.8 points overall. Only one of the five sub-indices expanded in May. Services employment expanded for the fifth consecutive month in May and at its fastest pace since December 2004. Both sales and new orders contracted for a second month. Supplier deliveries contracted for a third month and businesses reduced their stock levels for a 12th consecutive month. Four of the nine services sub-sectors expanded in May, including heath and community services, finance and insurance services, retail trade, and personal and recreational services.

According to the report, the Federal Budget and the cash rate cut had little impact on the services sector. Headwinds facing the Australian economy include lower business confidence, subdued economic growth, poor consumer sentiment and lower commodity prices. All of these factors were cited by the report as outweighing any positive contributions from the Federal Budget or the cash rate cut, if there was any contribution at all. The strong housing market and the lowered Australian dollar have both helped conditions remain relatively flat.

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Matthew Dibb Author: Matthew Dibb Jun 03, 2015

Matthew has an extensive track record in equity markets and derivative advisory. Spanning a career in several investment banks and prviate wealth groups including Macquarie Bank, his specialist knowledge relates to capital market advisory and equity market analytics. Matthew has a diploma in Financial Advisory, Applied Finance and is ADA 1 & 2 accredited.

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