Australia | May 05 2008
By Chris Shaw
Last week it was consumer spending figures suggesting the Australian economy is slowing and this week it is the Commonwealth Bank – AiG Performance of Services Index for April suggesting times are getting tougher in Australia, the index falling 7.6 points to a reading of 47.3, putting it below the key 50.0 level separating expansion from contraction.
According to CBA chief economist Michael Blythe the PSI Index outcome confirms rising petrol prices and interest rates and volatile financial markets are hurting confidence levels among consumers and impacting on activity levels across the economy.
Australian Industry Group chief executive Heather Ridout agrees, suggesting the data show it is the front-line sectors of retail trade, finance and insurance are bearing the brunt of the rises in interest rates and fuel prices.
The data confirm this as in seasonally adjusted terms only four of the nine sectors covered by the index expanded in April, down from eight sectors in March, with sharp contractions being felt in the retail trade, finance and insurance sectors in particular. The transport and storage sector also declined marginally, representing the first downturn in this sector of the economy since June of last year.
Adding to the weight of evidence suggesting a slowing in the economy overall were falls in sales, new orders and supplier deliveries, while at the same time the rate of stock accumulation rose slightly and employment was a little stronger. Sales or services fell for the first time since December 2006, the sales index recording a 14.2 point fall to 43.6 in seasonally adjusted terms. Rises were recorded in just two sectors, compared to seven in March.
New orders were similarly weak, falling 14.5 points to 43.6, only accommodation, cafes and restaurants and wholesale orders managing to record gains compared to eight a month earlier while interest rate sensitive sectors such as finance and insurance and retail trade registered large falls.
As the slowdown flows through inventories are slowing, the index showing stocks increased in seasonally adjusted terms by 3.1 points to a reading of 54, while supplier deliveries fell 3.2 points to a reading of 48.7. Only three states – Queensland, Victoria and South Australia, registered gains for the month, though the rate of growth in each has fallen from a month before.