MNI:Australia Service Sector Expands But Retail Contracts More

By Sophia Rodrigues

     SYDNEY (MNI) - Australia's services sector expanded further in December but

details remained mixed, showing few prospects for growth in household spending

or in inflation.

     Data published by the AI Group Thursday showed its performance of services

index rose 0.3 point to 52.0, showing the sector stayed in expansion for the

eleventh month in a row. The headline, however, masked the variation in both

activity sub-indexes and sub-sectors. Three of the five activity sub-indexes

were in expansion compared with four in November, with one stable and one in

contraction. 

     Among sub-sectors, four were in expansion in December versus five in

November. An acceleration in the expansion of the hospitality as well as

property and business services sectors was mostly offset by further contractions

in retail trade as well as health and community services.

     The outperformer was the large personal and business services sub-sector,

which rose 2.9 points on a trend basis to 65.5, the strongest level since

February 2003. Another positive outcome came in the hospitality sub-sector which

moved into expansion for the first time since 2015 as consumers seemed more

willing to spending their discretionary summer budgets on services and

activities like holidays and eating out rather than on goods purchases.

     In contrast was the further deterioration of the retail sub-sector, which

remained in contraction for the tenth straight month. The worsening in retail

conditions is more worrying because December is usually the busiest and the most

profitable month of the year for retailers.

     Overall, the pressure on margins increased in December as selling prices

fell by 4.6 points to 45.2, the lowest outcome since August 2016, while input

prices rose to the highest result since July 2015.

     From AI Group Performance of Services Index (Australian PSI) for December:

                      December  Change Over November

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

Australian PSI            52.0                  +0.3

Sales                     49.1                  -1.9

New Orders                51.0                  -1.9

Employment                52.7                  +0.6

Stocks                    50.8                  +1.5

Supplier Deliveries       58.5                  +6.6

Input Prices              63.7                  +6.3

Selling Prices            45.2                  -4.6

Average Wages             56.1                  -1.8

Capacity Utilization      79.3                  +1.3

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

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