The services sector recorded its most severe slump in three years during April driven by significant declines in new orders and low sales across the sector.
The latest Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (Australian PSI) dropped 7.4 points to 39.6 in the month (readings below 50 represent a contraction in activity with the distance from 50 indicative of the strength of the decrease).
None of the services sub-sectors experienced growth in April. The strongest declines were recorded in finance & insurance, personal & recreational and health & community services. Sales were down sharply with the sales sub-index falling by 10.8 points to 33.8. The new orders sub-index was at a level not seen since the Global Financial Crisis, down 11.9 points to 35.8 and employment fell for the third consecutive month.
Australian Industry Group Chief Executive, Innes Willox, said: "The slump in activity across the services sector during April gives strong support to the decision of the Reserve Bank to cut the cash rate. The sector is being held back by weak household and business demand, the flow-on impacts of the slump in residential and commercial construction and the competitive challenges of the high dollar.”
Commonwealth Bank Senior Economist, John Peters said: "The stellar Australian dollar in particular continues to hamper all export industries outside mining and import competing industries.”