The services sector continued to contract in May, albeit at a slower pace, according to the latest industry data.
The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (Australian PSI) lifted 3.9 points to 43.5 in the month (readings below 50 represent a contraction in activity with the distance from 50 indicative of the strength of the decrease).
Reports of weak trading were widespread in May with no state recording an expansion in services activity.
The only sub-sector to expand was personal and recreational services.
Australian Industry Group Chief Executive, Innes Willox, said: "The widespread difficulties across the services sector continued in May.
“Global uncertainties have further shaken business and household confidence and this is reflected in slower sales and falling employment.
“There is little sign to date of any respite flowing from the reduction in interest rates or from the easing in the level of the dollar over recent weeks. The weakness in new orders is of particular concern suggesting that the difficulties facing services businesses are set to continue over coming months, adding further weight to calls for another interest rate cut," Mr Willox said.
Commonwealth Bank Senior Economist, John Peters said the latest soft Australian PSI result reinforces just why the RBA felt compelled to cut rates by a surprisingly aggressive 0.5 of a per cent in May and again this month to try to boost low household and business confidence.
“Indeed, the multi-speed growth pattern across sectors and regions in the national economy is weighing heavily on the mood of business and consumers,” Mr Peters said.