Australia's services activity weakens in September

Activity in Australia's services sector shrank for the fifth month in a row in September, with consumers and businesses remaining cautious about spending, a survey showed on Tuesday.

The Australian Industry (AI) Group/Commonwealth Bank Australian Performance of Services Index (Australian PSI) fell 1.9 points to 45.6 in September.

It was the eighth time in 2010 the index has been below the key 50 point level separating contraction from expansion.

The finance and insurance sector recorded the most severe fall in activity, as the sub-sectors index dropped 15.3 points to 38.7.

The only sector that experienced growth in September was personal and recreational services after a sharp contraction in August.

Employment in the services industry was at its lowest level since January.

"September's result indicates a continuation of the weakness that has been seen across the services sector for most of the year, " AI Group chief executive Heather Ridout said in a statement on Tuesday.

"A wide variety of factors appear to be contributing to this weakness including tentative consumers and businesses influenced by political uncertainty, volatility in the global economy, the prospect of higher domestic interest rates and the ongoing withdrawal of fiscal stimulus."

The survey comes hours before the central bank is expected to raise the cash rate from 4.5 to 4.75 percent, its first rate rise since May.

"The pressures on businesses across the services sector would intensify if interest rates were to rise when sales are sluggish and employment in the sector is waning," Ridout said.

Commonwealth Bank, one of top five banks in Australia, Senior Economist, John Peters, said the latest Australian PSI readings were consistent with ongoing soft retail sales readings through much of 2010.

Source: Xinhua