Bloomberg News

Australian Services Contract for Fifth Month in Six on Currency

April 03, 2012

Australia’s services industry shrank in March, the fifth contraction in the past six months, as the sustained strength of the currency cut sales and curbed new orders, a private survey showed.

The performance of services index was 47 last month from 46.7 in February, close to 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.

Australia’s central bank signaled this week it may resume cutting interest rates from 4.25 percent as soon as next month if weaker-than-forecast growth slows inflation. The economy in February recorded its first increase in unemployment since August, to 5.2 percent, as the currency drove job losses at companies including Toyota Motor Corp. and General Motors Co.

“The bad news is that this pattern of growth is likely to persist through 2012 and into 2013,” Commonwealth Bank senior economist John Peters said in a statement. “The Australian dollar is unlikely to substantially depreciate due to the ongoing high terms of trade, and ongoing wide interest rate differentials with currencies of the advanced economies like the U.S., Japan, the U.K.” and the euro area, he said.

The Australian dollar has risen in six of the past seven quarters, reaching $1.0856 in late February, as a mining investment boom to meet demand from China and India intensifies. Earlier today the so-called Aussie traded at $1.0314.

Today’s report showed the index’s gauge for selling prices rose to 45.7 from 44.2 and the employment measure gained to 48.9 from 47.5.

Sales declined to 44.6 from 47.5, and the reading for new orders increased to 47.7 from 45.6. The wages indicator slipped to 55.2 from 57.7, 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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