SYDNEY, Nov 4 (Reuters) - Activity in Australia's service sector expanded for the first time in 19 months in October as new orders, sales and inventories picked up sharply, an industry survey showed on Wednesday.
The latest signs of recovery in services, from retail sales to recreation, reinforce the outlook for economic recovery and for more increases in interest rates from the Reserve Bank of Australia (RBA).
The Australian Industry Group (AiG)-Commonwealth Bank performance of services index (PSI) climbed 5.5 points in October to 54.8, finally taking it back above the 50 level that marks the threshold between growth and contraction.
The survey of around 200 companies found a notable recovery in the retail sector, suggesting consumer demand was faring well even after the boost from fiscal stimulus had faded.
And there was reason to think the improvement would continue as the survey's measure of new orders jumped 7.8 points to 58.5, again the highest since early 2008.
'We are particularly heartened by the movement of leading indicators such as new orders, inventories and supplier deliveries which have trended higher into expansionary territory,' said John Peters, a senior economist at CBA.
'These affirm the effectiveness of the prompt stimulatory policy measures taken by the RBA and the government', he added.
The central bank slashed rates to a record low of 3.0 percent early in the year, and so successful has stimulus been it is now unwinding some of that by hiking twice in the past four weeks.
The survey measure of sales surged 11.3 points to 59.7, with retail, recreational and communication services leading the way.
Firms also added to inventories for the first time in over a year, which should support economic growth in the fourth quarter.
The only disappointment came in employment, where the index dipped 1.3 points to 48.6, though that largely reflected past weakness in activity.
(Reporting by Wayne Cole; Editing by Jonathan Standing) (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) Keywords: AUSTRALIA ECONOMY/SERVICE (wayne.cole@reuters.com ; +61 2 9373 1813; Reuters Messaging: wayne.cole.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The latest signs of recovery in services, from retail sales to recreation, reinforce the outlook for economic recovery and for more increases in interest rates from the Reserve Bank of Australia (RBA).
The Australian Industry Group (AiG)-Commonwealth Bank performance of services index (PSI) climbed 5.5 points in October to 54.8, finally taking it back above the 50 level that marks the threshold between growth and contraction.
The survey of around 200 companies found a notable recovery in the retail sector, suggesting consumer demand was faring well even after the boost from fiscal stimulus had faded.
And there was reason to think the improvement would continue as the survey's measure of new orders jumped 7.8 points to 58.5, again the highest since early 2008.
'We are particularly heartened by the movement of leading indicators such as new orders, inventories and supplier deliveries which have trended higher into expansionary territory,' said John Peters, a senior economist at CBA.
'These affirm the effectiveness of the prompt stimulatory policy measures taken by the RBA and the government', he added.
The central bank slashed rates to a record low of 3.0 percent early in the year, and so successful has stimulus been it is now unwinding some of that by hiking twice in the past four weeks.
The survey measure of sales surged 11.3 points to 59.7, with retail, recreational and communication services leading the way.
Firms also added to inventories for the first time in over a year, which should support economic growth in the fourth quarter.
The only disappointment came in employment, where the index dipped 1.3 points to 48.6, though that largely reflected past weakness in activity.
(Reporting by Wayne Cole; Editing by Jonathan Standing) (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) Keywords: AUSTRALIA ECONOMY/SERVICE (wayne.cole@reuters.com ; +61 2 9373 1813; Reuters Messaging: wayne.cole.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.