Service sector activity up in June

Activity in the Australian services sector activity lifted in June, expanding for the fourth straight month, but businesses are finding high energy costs a problem.

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The Australian Industry Group’s Performance of Services Index (PSI) rose 3.3 points to 54.8 points in the month, staying above the 50-point level signifying expansion.

Ai Group chief executive Innes Willox said the services sector ended the financial year in positive territory, but conditions remain patchy across the sub-sectors.

“On the business inputs side, more businesses, across a wider range of sectors, are telling us that energy pricing and availability outlook is highly challenging,” Mr Willox said on Wednesday.

“The energy problem has become real and immediate for Australian business.”

The input prices sub-index lifted by 1.2 points to 59.3 points in June, with businesses continuing to single out high energy cost pressures across various sectors.

The wage sub-index also rose – up 4.4 points to 56.3 points – indicating stronger upward pressure on wages across the services sector.

Sales, new orders and employment all expanded.

Selling prices lifted after being weak over the last 18 months, but the lift suggested only mild price rises for customers.

Five of the nine services sub-sectors – property and business, finance and insurance, wholesale trade, personal and recreational services, and hospitality – expanded in June.

But transport and storage, health and community services, retail trade, and communication services contracted.

The Ai survey said some respondents had noted positive demand for business-to business services from the construction and infrastructure investment sectors.

Some businesses said consumer confidence had improved but this had not translated into better sales in retail.

Others said greater competition from offshore and online providers was negatively affecting activity across sectors that are consumer-oriented.