Services sector shrinkage sign of broader slowdown

"The survey shows transport and storage services was the worst performing sub-sector,
while cafes, restaurants and accommodation was the best."

There has been a sharp fall in the level of activity in the nation's services sector, with business-related services such as transport and storage faring particularly poorly.

The Performance of Services Index (PSI) by the Australian Industry Group and the Commonwealth Bank slipped 5.5 points to a reading of 44.1 in April.

That is below the key 50-point level that separates growth from contraction.

The Australian Industry Group's chief executive, Innes Willox, says businesses have been cutting prices and costs in response to weak demand.

"The services sector represents almost 80 per cent of our national economy, so this index is giving you a very clear indication of what is going on in the broader business and economic environment in Australia," he said.

The survey shows transport and storage services was the worst performing sub-sector, while cafes, restaurants and accommodation was the best.

Mr Willox says that shows the gap between business and consumer services appears to be widening.

"Hospitality, health and community services, personal training and recreational services - they did comparatively very well," he observed.

"Where the big fall came was in transport and storage, which reported its worst result since 2003. So there is a bit of a two-speed situation going on here."

Mr Willox has urged the Federal Government not to raise taxes in the upcoming budget, to give the economy time to recover.

"We now have evidence on a couple of levels that there was declining and slowing economic activity and that is across the board now," he said.

"Most importantly, as we also come into the budget time, this is further evidence that now is not the time to be cutting back on spending in productive areas or raising new taxes on the business community."

Source: ABC News, 3 May 2013