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Services sector activity slumps in August

AAP logoAAP 4/09/2016

The Australian service sector activity has contracted, falling to its lowest level in almost two years and sounding a sobering warning about the fragility of the economy.

The Australian Industry Group's Performance of Services Index (PSI) fell 8.9 points to 45.0 points in August, below the 50 point level that separated expansion from contraction.

The last time the index was that low was in November 2014.

"When combined with the return to contraction of the Australian Performance of Manufacturing Index as reported last week, the disappointing performance of the services sector sounds a sobering warning of the fragility of the economy," Ai Group chief executive Innes Willox said.

"The results demonstrate that business urgently needs confidence-building measures which drive productivity and reduce costs and barriers to growth. Now, more than ever, business needs all sides of politics to act together in the national interest."

August's poor result was driven by a big drop in the sales, employment, new orders, stocks and supplier delivery sub-indexes.

The retail trade, finance and insurance, and the communication sub-sectors all expanded in the month, but at a much slower pace than July.

The big health and community services sub-sector remained stable, down just 0.3 points to 49.9 points while transport and storage services touched a record low of 32.9 points.

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