Activity in the Australian services sector expanded in August for the first time in four months, despite continuing softness in household spending.
Service sector activity has contracted in nine out of the last 12 months.
In August, the categories of personal and recreational spending, finance and insurance and communications services boosted the result.
The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (PSI) rose 3.3 points to 52.1 points in the month.
A reading below 50 indicates contraction in activity.
Australian Industry Group chief executive Heather Ridout said activity in sub-sectors directly exposed to household spending remained soft.
“The ongoing patchiness across the sector reflects a lack of confidence on the part of households and businesses,” she said.
“Further, it underlines the fragility of the sector in the face of the strong Australian dollar, heightened uncertainties and our high interest rates.”
Activity in the categories of accommodation, cafes and restaurants and transport and storage contracted most sharply from July.
The wages index rose to 66.7 in August, its highest level in almost three years.
AIG said wage growth had increased over the past six months, partly reflecting rising wages growth in the wholesale trade, retail trade and transport and storage sub-sectors.
New orders also expanded in August by 4.7 points to 53.9 points.
Commonwealth Bank Senior Economist John Peters said the result was welcome after a period of lacklustre activity.
“Looking ahead, we see local GDP growth picking up to around four per cent on the back of stellar terms of trade,” Mr Peters said.
“Such an outcome is likely to drive solid jobs growth and further falling unemployment – a combination that should help lift consumer spirits and spending activity.”
Inventory levels in the services sector expanded in August to be above the critical 50 point level for two consecutive months.
The recent increase in stock levels in the services sector reflected growing inventories in the retail trade, finance and insurance and communication services sub-sectors.
