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Australia's services sector remains weak in December

01-05-2012 09:56 BJT

SYDNEY, Jan. 5 (Xinhua) -- Australia's services sector was still in negative territory in December 2011 as families were cautious about spending due to concerns over the outlook for the global economy, according to a survey released on Thursday by the Australian Industry Group (Ai Group).

The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (PSI) rose 1.3 points in December at 49.0 points, remaining below the 50-point level.

Readings below 50 indicate a contraction in activity.

Ai Group said the performance of services index suggested household discretionary spending softened in the lead up to Christmas and that retail sales remained subdued in December.

Professional services sub-sectors improved in December, with activity expanding in finance and insurance, as well as property and business services.

New orders across services were steady at 50.4 points in December.

Ai Group Director Public Policy Peter Burn said the lack of momentum in the services sector, as indicated by December's PSI, highlighted the flat conditions facing much of the economy.

"The somewhat stronger performance of business services sub- sectors contrasts with the ongoing weakness across most of the consumer-related sub-sectors," Burn said.

"This points to continued wariness on the part of households, some of which reflects the lack of progress in resolving the European sovereign debt issues, together with softness in domestic house prices."

Commonwealth Bank senior economist John Peters said market factors which include the eruozone sovereign debt crisis and the robust Australian dollar would continue to impact into 2012.

"The latest Australian PSI result reflects the multi-speed growth pattern across sectors and regions in the national economy which is being buffeted by substantial negative headwinds," he said.

"The bad news is that this pattern of growth is likely to persist in 2012 - the Australian dollar is unlikely to substantially depreciate due to the ongoing high terms of trade, and there is no end in sight to eurozone's chronic financial woes. "

Peters said that the Reserve Bank of Australia's decision to cut rates by a total of 0.5 percent in November and December should provide some boost to household and business confidence and to struggling segments of the economy including the services sector.

Editor:Zhang Hao |Source: Xinhua

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