Retail services expand ahead of Christmas

Shop owners have received some good news ahead of Christmas, with the retail services sector expanding for the first time in 12 months.

The Australian Industry Group - Commonwealth Bank Australian Performance of Services Index (PSI) improved in November, rising 4.3 points to 47.1 points.

Even though the overall sector was contracting but at a slower pace, the retail sector showed an expansion.

The sub-indice for retail services rose 13.6 points to 55.2. It was the first time that sector had been over 50 - the level that separates expansion from contraction - since November 2011.

Australian Industry Group chief executive Innes Willox said the improvement in retail came at a good time.

"While the sector as a whole remains weak, there are some tentative signs of encouragement, including the lift in retail trade one month out from Christmas," Mr Willox said in a statement.

The health and community services sector also expanded, up 12.4 points to 51.6, as did in finance and insurance, up 3.4 points to 69.7.

Communications services fell 23 points to 22.0 in November, and accommodation, cafes and restaurants fell 7.2 points to 41.0.

There was some improvement in new orders from businesses, up 5.4 points to 46.3, and the employment index rose 4.2 points to 48.3.

Mr Willox said the overall results showed Australian consumers remained cautious with their spending.

"Continuing weakness in the services sector lends support to yesterday's decision to cut interest rates," he said.

Commonwealth Bank senior economist John Peters said the weak spending trend could change next year, in response to the rate easings by the Reserve Bank of Australia (RBA).

"Recent policy easing by the RBA, which has seen the cash rate lowered by one per cent over the past 12 months, should further boost consumer sentiment and activity in early 2013," he said.

The RBA cut the cash rate by a quarter of one percentage point to 3.00 per cent on Tuesday - the cash rate's lowest level since the global financial crisis.

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