MNI:Australia Services Sector Up;Good Start Despite Variations

--Variations in Sub-Sector Continues

By Sophia Rodrigues

     SYDNEY (MNI) - Australia's services sector expanded further in January and

while the variations in sub-sectors continued, some details on employment and

selling prices were encouraging and bode well for growth and inflation prospects

for the economy.

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

index rose 2.9 points to 54.9, remaining in expansion for 11 straight months and

the longest streak since March 2008.

     However, the variations in activity across sub-sectors widened with just

three in expansion in January compared to four the month before, with

consumer-oriented sectors faring worse than business-oriented.

     The retail sub-sector improved modestly as it benefitted from extreme heat

and the Australian Open tennis tournament in Melbourne but key headwinds from

offshore and online retail competition remained. The wholesale sub-sector fell

into contraction after a relatively good year in 2017.

     On the positive side, new orders rose in January, pointing to strong start

to the industry this year. Employment recorded its highest monthly result since

December 2004 and wages rose above the long-run average, indicating labor demand

is rising for some sectors.

     Selling prices jumped up into expansion, showing first signs of solid

increases in prices since June 2017. It suggests businesses are feeling some

confidence to pass on input cost increases to customers.

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

                      January  Change Over December

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

Australian PSI           54.9                  +2.9

Sales                    53.9                  +4.8

New Orders               54.5                  +3.5

Employment               58.1                  +5.4

Stocks                   52.5                  +1.7

Supplier Deliveries      53.7                  -4.8

Input Prices             60.7                  -3.0

Selling Prices           51.8                  +6.6

Average Wages            57.5                  +1.4

Capacity Utilization     81.1                  +1.8

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

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