by Chris Becker
AIG released its December survey of the Australian services industry this morning and it makes for dour reading, although the rate of deterioration has slowed, the largest part of the economy remains in the doldrums (full report here):
After two months of very weak performance, conditions in the services industries deteriorated at a slower pace in December, with the Australian Industry Group Australian Performance of Services Index (Australian PSI®) improving by 3.7 points to 47.5 – a tenth consecutive month of contraction since the services sector’s last expansion in February 2014 (index readings below 50 points indicate a contraction in activity, with the distance from 50 indicating the strength of the contraction).
They noted that all sub-indexes are in contraction mode for three months running now, with the Christmas trading period not providing much uplift, with input prices putting a damper on new orders:
Only the health sector showed any expansion, probably due to the ageing population and consequent increasing spend on health “services”. Not exactly a prosperity multiplier.
The commentary would not fit well in those economists minds who see rate rises in 2015:
Respondents…expressed continuing concerns about consumer spending due to weak local economic conditions, fragile consumer and business confidence and slower growth in household disposable income.
Or those who think the hand off from mining to services/construction will work:
In addition, the ongoing decline in mining construction activity and flat manufacturing investment continue to weigh down demand for business-to-business services including accounting, legal, personnel and administrative services.
And of course the fall in the AUD has been too late and not far enough:
The recent fall in the Australian dollar is very welcome but it seems it is still too soon to see any significant benefits for local activity. The services industries will be hoping for stronger local spending in 2015 from both consumers and other businesses, fuelled in part by the lower dollar.”
Hope is not a strategy to bet a country’s prosperity on.