Bloomberg News

Australian Services Weakened In February as Non-Mining Industries Falter

March 04, 2012

Australia’s services industry declined in February to the lowest level in almost a year, driven by a drop in new orders as the gap between resources and other industries widens, a private survey showed.

The performance of services index sank to 46.7 last month from 51.9 in January, the weakest reading since March last year, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction.

The Reserve Bank of Australia cut interest rates in November and December in the first back-to-back reductions in two years, lowering the benchmark to 4.25 percent to boost demand as inflation pressure eased. Resource projects in Australia valued at A$456 billion ($490 billion), fueled by companies such as BHP Billiton Ltd. (BHP), are helping cushion a slump in manufacturing and services hurt by a strong currency.

“The booming conditions in mining and mining-related activity are not translating into increased activity in large parts of the domestic economy and, with few exceptions, sales and new orders for services and employment in the sector were all lackluster in February,” Innes Willox, AIG chief executive designate, said in a statement.

Employment in Australia stalled last year as the currency’s climb hurt non-resource companies. Jobs probably gained by 5,000 last month and the unemployment rate rose to 5.2 percent, a survey of economists showed before a March 8 employment report.

Today’s report showed the index’s gauge for selling prices fell to 44.2 from 46.9 and the employment measure slid to 47.5 from 51.2.

Sales declined to 47.5 from 49.4, and the reading for new orders plunged to 45.6 from 54.1. The wages indicator dipped to 57.7 from 57.8, 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.

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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