SYDNEY, Feb 3 (Reuters) - Activity in Australia's service sector contracted in January for the first time in four months, a survey showed on Wednesday, with firms blaming higher interest rates for dampening confidence and employment.
The Australian Industry Group (AiG)-Commonwealth Bank performance of services index (PSI) fell 2.6 points in January to stand at 47.4, below the 50.0 level that marks the threshold between growth and contraction.
The survey of around 200 companies showed that despite a modest lift in sales, employment fell sharply in the month and new orders and supplier deliveries continued to decline.
Many pointed a finger at the Reserve Bank of Australia (RBA) for lifting interest rates 75 basis points in the previous three months. There should be some relief then that the central bank skipped another chance to hike at its policy meeting on Tuesday.
The RBA board kept rates at 3.75 percent, defying market expectations for a rise, saying it wanted more time to asses the impact of its previous moves.
'Yesterday's decision by the Reserve Bank to leave interest rates on hold will give welcome breathing space to the services sector which has clearly endured a lacklustre holiday period,' said AiG's chief executive, Heather Ridout.
'While confidence has certainly picked up in the sector, and consumers are feeling more positive, conditions are still volatile and uneven.'
Indeed, the sectors most exposed to consumers reported tougher conditions in January, with activity contracting in retail and wholesale, recreational services, and hotels and restaurants.
The index for sales eased 0.7 points to 51.7, but stayed within expansionary territory. The measure of new orders dipped 0.1 to 48.0 while the inventory index dropped 5.8 to 40.9, showing firms were running down stocks rather than ordering new merchandise.
The employment index fell 6.9 points to 45.7, a disappointing outcome that will stir some doubt about the demand for labour. Official employment figures have surprised everyone with their strength in the last few months and fuelled hopes the jobless rate had peaked at a historically low 5.8 percent.
The largest falls in employment were in accommodation, cafes & restaurants; finance & insurance and wholesale trade.
(Reporting by Wayne Cole; Editing by Balazs Koranyi) (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 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) fell 2.6 points in January to stand at 47.4, below the 50.0 level that marks the threshold between growth and contraction.
The survey of around 200 companies showed that despite a modest lift in sales, employment fell sharply in the month and new orders and supplier deliveries continued to decline.
Many pointed a finger at the Reserve Bank of Australia (RBA) for lifting interest rates 75 basis points in the previous three months. There should be some relief then that the central bank skipped another chance to hike at its policy meeting on Tuesday.
The RBA board kept rates at 3.75 percent, defying market expectations for a rise, saying it wanted more time to asses the impact of its previous moves.
'Yesterday's decision by the Reserve Bank to leave interest rates on hold will give welcome breathing space to the services sector which has clearly endured a lacklustre holiday period,' said AiG's chief executive, Heather Ridout.
'While confidence has certainly picked up in the sector, and consumers are feeling more positive, conditions are still volatile and uneven.'
Indeed, the sectors most exposed to consumers reported tougher conditions in January, with activity contracting in retail and wholesale, recreational services, and hotels and restaurants.
The index for sales eased 0.7 points to 51.7, but stayed within expansionary territory. The measure of new orders dipped 0.1 to 48.0 while the inventory index dropped 5.8 to 40.9, showing firms were running down stocks rather than ordering new merchandise.
The employment index fell 6.9 points to 45.7, a disappointing outcome that will stir some doubt about the demand for labour. Official employment figures have surprised everyone with their strength in the last few months and fuelled hopes the jobless rate had peaked at a historically low 5.8 percent.
The largest falls in employment were in accommodation, cafes & restaurants; finance & insurance and wholesale trade.
(Reporting by Wayne Cole; Editing by Balazs Koranyi) (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 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.