Service sector activity remained weak according to the Australian Industry Group-Commonwealth Bank of Australia performance of service index, pointing to a persistent slowdown underway in the Australian economy.
The index gained 1.5 points to 39.3 points in December, an improvement from November’s 37.8 point reading, the weakest on record.
However, the index has been below the 50 point level that separates growth from contraction for nine consecutive months, underscoring the scope of the slowdown in the Australian economy.
Commonwealth Bank senior economist John Peters said the persistent weakness provides little cause for optimism in the months ahead. "Substantial softness in services sector activity will continue to weigh on the economy," he said.
Christmas gave the small boost to December’s reading, increasing demand for business services and transportation, the report said.
But service activity declined in all states with New South Wales and Western Australia contracting the most. Across the service industry sectors measured by the gauge, only health and community services expanded in December, "highlighting the extent to which the industry has been hit by the global economic downturn," the report said.
Looking ahead, Mr Peters said dropping interest rates, falling petrol prices and a weaker dollar "should cushion the local economy" from the worst effects of faltering economic activity.
Nonetheless, Mr Peter said "a period of paltry growth and rising unemployment lie ahead in 2009."
czappone@fairfax.com.au
BusinessDay
