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Australian Performance of Services Index - Services Activity Continues to Moderate

5 April 2004

Services activity has slowed for the third successive month with the March Australian Industry Group – Commonwealth Bank Performance of Services Index TM (PSI) falling 1.8 points to 52.1 on a seasonally adjusted basis.

The index is well below the most recent high of 63.1 in October last year suggesting service sector growth has slowed appreciably from the very strong levels of late 2003.

Commonwealth Bank Senior Economist, Michael Workman, said the strength of activity varied widely across all sectors.

"Activity in accommodation and entertainment, communication and selected retail remains firm. While there are further signs of moderating activity in property and business services, finance and insurance, and health and community services," Mr Workman said.

The Australian PSI in March found sales, new orders, stockbuilding and supplier deliveries all eased. The sales index fell to 50.0, pointing to relatively flat demand across the service sector in March. The inventory and delivery indexes also dipped back below 50, the former suggesting a modest rundown in stocks.

Australian Industry Group Chief Executive, Heather Ridout, said that although easing, new orders remained at comfortable levels and pointed to continuing modest growth in service sector activity in the months ahead.

"The PSI has been flagging a slowdown in service sector activity for several months, which now seems to have been corroborated by official retail sales data for February.

"Consistent with the Australian Performance of Manufacturing Index in March, the PSI result suggests non-farm GDP growth is moderating from the very strong levels of late 2003," Mrs Ridout said.

Summary of Key Points:

Australian Industry Group – Commonwealth Bank Performance of Services Index ™ (PSI) slipped 1.8 points to 52.1.

Sales, new orders, stockbuilding and supplier deliveries all eased.

The inventory and delivery indexes also dipped back below 50.

Activity rose in four sectors and eased in five:

Rises in wholesale and retail trade, accommodation, and communication services.

Slowing in transport, property and business, finance and insurance health and personal services.

Activity was higher than a year earlier in wholesale trade, accommodation, transport, communications and finance and insurance.

Activity was lower than year earlier levels in retail trade, property and business services, health and personal and recreational services.

Retail trade and personal and recreational services were two sectors to record sub-50 readings.

The strongest reading was in accommodation.

The employment index rose 1.5 points to 53.3.

Prices paid edged higher, from 59.5 to 59.8.

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