Australia’s massive services sector is back in expansion territory – but it’s not all good news

Unlike Australia’s manufacturing PMI, which tanked in June, Australia’s massive services sector climbed back into the expansion territory to end the financial year up 1.6 points to 51.2.

The AiGroup said it’s Performance of Services Index (PSI) showed 3 of the 5 ‘activity’ sub-indexes were in expansion territory with strong gains in sales which rose 8.2 to 53.4 and new orders up 6.9 to 54.8.Supplier deliveries were also up, rising 2.1 to 51.4. On the negative side the employment sub index tanked 10.7 points to 47.3 and inventories dipped 1.8 to 46.4.

The latter two are concerning given that inventories falling for the 13th consecutive month and a big reduction in employment plans suggests a business sector still worried about the future economic prospects for the economy.

Also troubling is that with only three of the nine services sectors the AiGroup surveys in expansion territory the PSI shows how concentrated gains in the sector are.

Innes Willox, the AiGroup CEO, highlighted this. “The improvement in services industry conditions so far this year has been concentrated in consumer services. Increased housing market activity and very low interest rates are now assisting retail and personal and recreational services, although consumer confidence and household income growth are still below par. For the more business-oriented services sub-sectors, weak business confidence, an uncertain outlook, and low private and public investment, are still weighing on demand across a range of design, consulting, personnel and administrative services,” he said.

Follow Business Insider Australia on Facebook, Twitter, and LinkedIn