Services sector down as consumers lose confidence


Weakening consumer confidence saw the services sector fall in May, according to the latest seasonally adjusted Australian Industry Group/Commonwealth Bank Performance of Services Index (Australian PSI).

The index fell 4.8 points to 47.5 (below the 50.0 point level separating expansion from contraction).

Continuing consumer uncertainty was reflected in the softness of the retail and accommodation, cafes and restaurants sub-sectors. 

The transport and storage, communication services, health and community services and property and business services sub-sectors all contracted in May.

Finance and insurance and personal and recreational services sub-sectors rose modestly in the month.

Australian Industry Group Chief Executive, Heather Ridout, said: "The May Australian PSI result marks the continuation of a fairly ordinary performance by the sector this year.

"While the RBA's decision this week to leave the cash rate unchanged is welcome, services activity has been weighed down by the string of earlier interest rate rises, which have dented both consumer confidence and business demand at a time of renewed volatility in global markets.

"The disappointing trend points to a commercial environment that is falling short of activity levels that would put the sector on a solid growth path.  Sentiment remains uneasy and growth patchy in consumer-related sectors, while the weakness in new orders suggests continuing softness in activity in the near term."

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