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Retail activity up in October: survey

Michael Mehr
More customers hit the shops in October, a survey of the Australian services industry suggests

Shops reported an increase in customers in October amid signs retail grew solidly for the first time in a year, a survey of the Australian services industry suggests.

"Increased discretionary spending was evident across the consumer sectors," the Ai Group said in its summary of its monthly Australian Performance of Services Index report.

The report released on Tuesday will likely be welcomed by retailers after ABS figures released on Monday calculated that retail spending in September rose by only a lacklustre 0.2 per cent - half as much as expected by economists.

"A strengthening of the Australian PSI in October is an encouraging if tentative sign of a gradual pick-up in services sector activity," Ai Group chief executive Innes Willox said.

The overall PSI measure rose 2.7 points in October to 54.2, moving higher above the 50-point mark separating expansion and contraction in activity.

The PSI, compiled from responses of about 200 companies, indicated that retail sector activity was up 1.7 points to 52.4 points on a trend basis in October as more items were sold although the improvement may have been propped up by prices that continued to slide.

"Retail sector participants reports an increase in new customers and better weather conditions for sales this month," the AiG report said.

"There are tentative signs that lower interest rates and recent tax rebates may be providing a mild boost to local discretionary spending".

Mr Willox said many companies continued to face tighter margins.

"The fall in selling prices reported by businesses should serve as a note of caution and some of the sales growth was associated with price discounting," he said.

The growth in the retail, hospitality and recreation sectors offset contraction during the month in the PSI categories of "property and business services" and wholesale trade, which both declined at an accelerated pace.

"Respondents noted slower demand from the construction sector and lack of confidence from business customers. They said the slow global outlook is inhibiting demand," the report said.