Services grow despite healthcare wane

Australia’s service sector returned to modest expansion in March, new figures show, but jobs-heavy health and community services industries contracted for a third consecutive month.

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The Australian Industry Group’s Performance of Services Index (PSI) rose 2.7 points to a level of 51.7 points in March, rising above the 50-point level signifying expansion.

Ai Group chief executive Innes Willox said the main drivers of the expansion were rebounds in measures of sales and employment.

However, he warned that the large health and community services sub-sector remained in contraction for the third straight month.

“The heavy lifting fell on the property and business and finance and insurance sub-sectors along with wholesale and retail services, which are enjoying a return to growth,” Mr Willox said in a statement.

“The pickup in new orders during March is encouraging and services businesses will be hoping that positive momentum builds over the next few months. The reduction in business taxes negotiated in the Senate last week will provide a very welcome boost for the services sector.”

The index showed sales, new orders and employment all improved in the month after being either flat or in contraction in February.

Five of the nine services sub-sectors expanded in the month, led by property and business and finance and insurance.

The large health and community sub-sector fell a further point to 47.8 points, while the the hospitality sub-sector, which has been either flat or contracting for 16 months, rose a further 0.2 points to 44.9 points.

Input prices continued to rise and wage growth improved for an eighth straight month, albeit at a slower pace again.

Selling prices lifted 3.3 points to 51.3 points in March, with Ai Group noting the rise had come in an environment of very weak price inflation.