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Australia: AIG services index contracts for seventh straight month

FXStreet (Bali) - The AIG performance of services index for the month of September came at 45.4 vs 49.4, which represents a seventh straight month of contraction.

Ai Group Chief Executive, Innes Willox: "The drop in September calls into question the momentum that had been gathering over the previous couple of months. The sharp falls in sales and new orders underlines the fragility of the economy in search of sources of growth beyond the minerals and energy sector."

"That said, some more encouraging signs are evident: the retail sub-index entered into positive territory for the first time in over three years, other household-facing sub-sectors such as hospitality and personal & recreational services also expanded, and the employment sub-index recovered some of the ground lost after six months of contraction. With commodity prices falling and global markets displaying greater volatility, it has become more important that we develop new areas of strength in the domestic economy.”

Key findings (AiG)

Three-month moving average also moved lower, to 48.0 points in September
All of the activity sub-indexes, except for employment, were below 50 points (i.e. contraction) in September. Both the sales and new orders sub-indexes fell sharply this month following mild expansions in August and July. Supplier deliveries contracted again while stock levels fell at a faster rate in September

The employment subindex indicated mild expansion in September for the first time since February. Five out of the nine services sub-sectors showed mild expansion this month (above 50 points, three month moving averages), including finance and insurance (54.8 points), personal and recreational services (52.3 points), retail trade (52.0 points) and accommodation, cafes and restaurants (51.4 points).

The property and business services sub-sector stabilised this month, but lower engineering construction and manufacturing activity continued to reduce the flow of work coming into other business-oriented services sub-sectors. The very large health and community services sub-sector contracted for the first time since June 2013 (45.5 points, three-month moving averages). Respondents to the Australian PSI ® raised ongoing concerns about the weak state of the local economy and the effect of Federal Budget uncertainties this month.

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