Services look for uptick in spending

ACTIVITY in the Australian services sector edged up only marginally last month with households wrapping up 2017 on a cautious note, research indicates.

The Australian Industry Group’s performance of services index has climbed 0.3 points to 52 for December.

That means it remains above the pivotal 50-point level, suggesting activity in the sector is still growing.

Four of the nine sub-sectors expanded, polling for the index found, but contraction in a further four kept overall growth muted.

Ai Group chief Innes Willox said that while the services sector had expanded overall, declines in the retail, health, transport and communication sub-sectors kept the month’s gains modest.

The retail trade sub-sector index moderated to 44.5 points, indicating a further deterioration in conditions, and marking a 10th straight month of flat or declining activity.

Retail businesses blamed a lack of consumer confidence and cautious attitude to spending.

“Service businesses will be looking for a lift in consumer confidence and household spending as the new year unfolds,” Mr Willox said.

“The failure to improve in December reflects ongoing weakness in local consumer spending, even at this busiest and most profitable month of the year for local retailers.

“Rising energy costs have become a widespread cost pressure, with participants reporting that energy costs are eating into margins across almost all services sub-sectors.”

Employment growth accelerated slightly, with this subindex up 0.6 points.