Australia’s service sector dips marginally in June on looming political uncertainty

Australia’s services sector witnessed marginal dip in the month of June, largely owing to ongoing political uncertainty, concerning the recently held Federal elections, which are awaiting the final results. However, the dip was negligible against an environment of economic distress and financial instability.

The latest Performance of Services Index (PSI) released by the Ai Group earlier on Tuesday came in at 51.3, down fractionally on the 51.5 level seen in May. It, however, remained above the 50-point mark that demarcates expansion from contraction. The current levels indicate that services activity is modestly gaining pace at the moment.

Further, sales rose 1.1 points to 52.8 while the employment sub-index jumped 4 points to 53.1, leaving it in expansionary territory for the first time since August 2015. This possibly indicates that hiring activity has expanded during the month, pushing the wage sub-index 0.5 points closer, to 50.8.

Moreover, new orders, a forward indicator on future levels of activity, weakened fractionally to 51.8, down 3.5 points from May, although it too held above the 50 level indicating an improvement. Across the surveys, sub-indices exhibited mixed performances in June, although all of the major components continued to sit above the 50 level indicating that activity levels are improving.

Communication services were up 0.2 points to 44.7, while wholesale trade dropped 2.2 points to 42.0. Also, transport and storage fell 7.5 points to 36.2, showing the lowest reading since January 2014. Accommodation, cafes and restaurants experienced a second straight loss, declining 6.0 points to 36.3.

However, personal and recreations services rose 0.8 points to 39.9, compared to health and community services that plunged 3.8 points to 49.4.

"While the election outcome remains uncertain, it is clear that more widespread growth across the sector is needed to put the rebalancing of the economy on a firmer footing and to consolidate the recent return to expansion of this important sector," said Innes Willox, CEO, Ai Group.