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By Sophia Rodrigues
SYDNEY (MNI) - Following are the five key observations we made from
Australian Industry Group's Performance of Services Index for May published
--The services industry expanded for fifteen straight months, up 3.8 points
to 59.0 in May. The latest rise was driven by new orders which surged 8.7 points
to 65.0 points.
--Capacity utilization fell marginally in May to 81.9% but remained well
above the long-term average of 75.7% suggesting businesses have low spare
capacity and may soon need investment to spend.
--Selling prices sub-index rose 1.4 points to 52.9 to mark five straight
months of increase. This indicates businesses are feeling slightly more
confident to raise prices amid rising input and labor costs. Input prices rose
9.7 points to 66.8 points and average wages rose 4.4 points to 64.6. Wage
pressures appeared to be increasing due to skill shortages in higher skill and
business oriented sub-sectors. If this becomes widespread, it would bode well
for the wage costs for the economy and support the Reserve Bank of Australia's
monetary policy stance for next move in the cash rate to be up.
--The expansion in the services industry, however, remained uneven with
more discretionary, mainly consumer-oriented sub-sectors remained relatively
weaker but business oriented sub-sectors doing very well. Retail trade
contracted again, as did hospitality as they continue to report cautious
discretionary spending due to rising energy and other household costs, as well
as changing consumer preferences.
--The transport and storage services sub-sector rose by 3.1 points to a
record high of 71.3 points in May. However, AI warns this could be an aberration
due to an unusually concentrated sample of respondents in 2018, all of whom are
reporting strong conditions of late. May has historically been a quieter month
in the year for this sector, but this May the transport businesses are still
reporting robust demand from their business customers, and particularly from
those in the busier parts of manufacturing and construction.
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: email@example.com