Bloomberg News

Australia January Services Expand, Snapping 3-Month Contraction

February 02, 2012

Feb. 3 (Bloomberg) -- Australia’s services industry expanded in January, snapping three straight months of declines, as back-to-back interest-rate reductions boosted businesses including accommodation, cafes, finance and recreation.

The performance of services index advanced 2.9 points to 51.9 in January, the highest reading since August, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction.

Reserve Bank of Australia Governor Glenn Stevens lowered the overnight cash rate target to 4.25 percent from 4.5 percent on Dec. 6, citing turbulence in financial markets and an increased chance of a “further material slowing in global growth” as Europe’s sovereign debt crisis intensified. The local dollar touched a five-month high yesterday after government data showed a record trade surplus last year.

“The easing of interest rates towards the end of 2011 may have lifted consumer confidence despite the dampening stream of news coming from Europe,” Peter Burn, director of public policy at the Australian Industry Group, said in a statement. “The services sector remains patchy and continues to face strong headwinds including from the strength of the dollar and flat labor market conditions.”

Companies outside of Australia’s booming mining industry are struggling, and the so-called two-speed nature of the nation’s economy was reflected in the loss of 29,300 jobs in December, capping the worst year for employment since 1992.

The index’s gauge for selling prices fell to 46.9 from 48.9 and the employment measure rose to 51.2 from 48.1.

Sales rose to 49.4 from 47, and the reading for new orders climbed to 54.1 from 50.4. The wages indicator slid to 57.8 from 60.4, the report showed.

Today’s report, based on a poll of about 200 companies, is similar to the U.S. non-manufacturing ISM index.

The report measures sales, new orders, deliveries, inventories and employment for companies such as banks, real- estate agents, insurers, restaurants, transport firms and retailers to compile the overall performance of services index.

--Editors: Brendan Murray, Benjamin Purvis

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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