Services still struggling with high dollar

Activity in the Australian services sector has fallen for the ninth consecutive month, weighed down by weak consumer confidence.

The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (PSI) for October rose 0.9 points to 42.8 points.

A reading below 50 indicates a contraction in activity.

Eight of the nine sub-sectors covered by the activity survey recorded falls in the month, with transport and storage, retail trade and wholesale trade among the weakest.

Commonwealth Bank senior economist John Peters said the services sector continued to suffer from the impact of the high Australian dollar.

‘‘Sectors exposed to household spending, particularly retail trade and wholesale trade segments, have experienced particularly sharp falls in activity,’’ he said.


‘‘The latest services sector snapshot is still gloomy and underscores the multi-speed growth pattern being posted across industries and regions around Australia.’’

The Reserve Bank of Australia (RBA) has cut its interest rate by 1.25 percentage points in the past 12 months but, Mr Peters said, it had not yet had an impact on boosting consumer spending.

He said he expected another cut to the cash rate at the November RBA board meeting on Tuesday.

Australian Industry Group (Ai Group) chief executive Innes Willox said the services sector, which makes up 75 per cent of the economy, was still struggling.

‘‘With activity weak and businesses in the sector operating in a market that is forcing them to cut their prices, there is clearly strong scope for further interest rate relief in the leadup to Christmas,’’ he said.