Australia AI Group Services Sector Index Expands for 5th Month

--Retail Contracts Further; Selling Prices Below 50.0

--Finance and Insurance Expand to Highest in 14 Months

     SYDNEY (MNI) - From AI Group Performance of Services Index (Australian PSI)

for July published Thursday.

                      July  Change Over June

--------------------------------------------

Australian PSI        56.4              +1.6

Sales                 60.3              +5.6

New Orders            55.2              -3.7

Employment            56.9              +3.7

Stocks                50.8              -0.5

Supplier Deliveries   54.5              +1.4

Input Prices          58.9              -0.4

Selling Prices        49.1              -2.9

Average Wages         55.1              -1.2

Capacity Utilization  78.2              +1.2

     FACTORS: The services index expanded for a fifth consecutive month --

reaching its highest this year as sales and employment grew at a stronger pace.

The expansion was more broad-based in trend terms compared with June. Six of the

nine subsectors were above 50.0. Employment rose 3.7 points to 56.9 -- the

strongest monthly result since May 2015. Supplier deliveries rose for two months

of expansion while the rise in new orders moderated but still suggested more

growth this year. The increase in input prices moderated as did wages growth but

selling prices fell at a faster pace and into contraction. Among subsectors

retail trade contracted for the fourth consecutive month but wholesale improved

marginally. The very large finance and insurance subsector index rose by 2.8

points to 59.6 points -- the highest monthly result in 14 months. This subsector

includes banking, insurance, superannuation and financial advisory services.

     TAKEAWAY: The growth in the services industry continues to be driven by

business-to-business services and while some businesses are seeing an

improvement in consumer confidence it doesn't seem to be translating into better

conditions or sales in retail. The contraction in retail trade and selling

prices are negatives from the latest survey and may offset the positive effect

of the overall expansion in services. In the latest cash-rate statement the

Reserve Bank of Australia said a source of uncertainty for the domestic economy

is the outlook for consumption. The contraction in retail trade shows how those

concerns are unlikely to fade soon.

     COMMENTS: AI Group Chief Executive Innes Willox said high energy costs were

negatively affecting business margins in 2017. "At near $0.80 cents, and

possibly rising, the higher dollar could soon start to bite into margins and

into demand for local goods and services as well."

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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