SYDNEY, Jan 6 (Reuters) - Growth in Australia's service sector came to a stop in December as sales and new orders felt the chill from rising interest rates, though employment continued to pick up, an industry survey showed on Wednesday.
The Australian Industry Group (AiG)-Commonwealth Bank performance of services index (PSI) eased 2.5 points in December to stand at 50.0, exactly the level that marks the threshold between growth and contraction.
The survey of around 200 companies found many blamed higher interest rates for the slowdown. The Reserve Bank of Australia (RBA) lifted its cash rate to 3.75 percent early in December, the third hike in as many months.
'Softer demand for services in December reflects remaining uncertainties about the durability of the economic recovery and the impact of rising interest rates in the quarter,' said AiG's chief executive, Heather Ridout.
That, in turn, argued for a pause in rate rises, said Ridout. The market is split on whether the RBA will hike at its next policy meeting in February, putting the probability at 50:50.
The survey's index of sales dropped 3.0 points to 52.4 in December, while the measure of new orders fell a sharp 8.6 points to 48.1. The retail industry suffered the most, contrasting with strength in communication services and accommodation, cafes & restaurants.
Still the index of employment rose 2.1 points to 52.6, edging further into expansionary territory. That could bode well for official jobs data due next week.
'There are some encouraging signs with services sector employment and sales rising over the past few months,' said CBA senior economist Michael Workman.
'If these developments persist we would be more confident of a modest revival in activity in the first half of 2010.'
The survey showed firms ran down inventories at a slower pace in December. The index of inventories rose 2.1 points to 46.7, recovering a little from a sharp drop the month before.
Price pressures eased somewhat with the index of input prices off 6.3 points at 59.7, while selling prices dipped 0.1 point to 53.6.
(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/SERVICES (wayne.cole@reuters.com ; +61 2 9373 1813; Reuters Messaging: wayne.cole.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. 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 Australian Industry Group (AiG)-Commonwealth Bank performance of services index (PSI) eased 2.5 points in December to stand at 50.0, exactly the level that marks the threshold between growth and contraction.
The survey of around 200 companies found many blamed higher interest rates for the slowdown. The Reserve Bank of Australia (RBA) lifted its cash rate to 3.75 percent early in December, the third hike in as many months.
'Softer demand for services in December reflects remaining uncertainties about the durability of the economic recovery and the impact of rising interest rates in the quarter,' said AiG's chief executive, Heather Ridout.
That, in turn, argued for a pause in rate rises, said Ridout. The market is split on whether the RBA will hike at its next policy meeting in February, putting the probability at 50:50.
The survey's index of sales dropped 3.0 points to 52.4 in December, while the measure of new orders fell a sharp 8.6 points to 48.1. The retail industry suffered the most, contrasting with strength in communication services and accommodation, cafes & restaurants.
Still the index of employment rose 2.1 points to 52.6, edging further into expansionary territory. That could bode well for official jobs data due next week.
'There are some encouraging signs with services sector employment and sales rising over the past few months,' said CBA senior economist Michael Workman.
'If these developments persist we would be more confident of a modest revival in activity in the first half of 2010.'
The survey showed firms ran down inventories at a slower pace in December. The index of inventories rose 2.1 points to 46.7, recovering a little from a sharp drop the month before.
Price pressures eased somewhat with the index of input prices off 6.3 points at 59.7, while selling prices dipped 0.1 point to 53.6.
(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/SERVICES (wayne.cole@reuters.com ; +61 2 9373 1813; Reuters Messaging: wayne.cole.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. 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.