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  MARKET REPORTS

SERVICES
Services sector sinks to record low
July 03, 2008
AAP


Australia's services sector performance has fallen to a record low and contracted for the third successive month as high petrol prices and interest rates stifle consumer and business spending, a report shows.

The Australian Industry Group/Commonwealth Bank performance of services index fell 4.3 index points in June to 45.4 points.

It is the worst result on record since the series began in February 2003.

The number has been below the 50 mark, which separates an expansion from a contraction, since April.

Commonwealth Bank of Australia chief economist Michael Blythe said interest rates rises and high fuel costs were hurting the services sector.

"It's really that combination of very tight financial conditions, as the Reserve Bank has been talking about record high petrol prices," he said.

"The very sharp drops in consumer confidence have impacted on services and produced this softer result."

Crude oil prices hit a record $US140 a barrel in June, and have since climbed to $US144.

Australian Industry Group chief executive Heather Ridout said the weakness in services activity was broad-based.

"The rising price of oil - to above $US140 per barrel - and high interest rates have significantly dented consumer and business confidence with little prospect of a reprieve in sight," she said.

"The rising price of oil led to the fastest rate of input cost growth since the survey's inception."

Activity expanded in just two of the services sectors in June, down from four in May.

Significant pressure on discretionary spending contributed to contractions in retail trade, accommodation, cafes and restaurants and personal and recreational services.


More articles from this edition of CompareShares:

Stocks: 2008 champion stocks and techniques to find them
Advisor Lounge: Transition to Retirement strategy – is it tax effective?
Macro focus: What’s king; the pick of stocks, bonds and cash
Market: Aussie stock market lowest in two years
Report: Manhunt for death-faking hedge fund manager ends
Oil: Oil prices spike past $US144 record
Services: Services sector sinks to record low



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