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Services sector contracted in January

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AAP

2013-02-05

Australia's services sector contracted for the 12th consecutive month in January amid slowing activity in the mining sector and soft retail sales.

The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (PSI), released on Tuesday, rose 2.1 points to 45.3 in January.

A reading of below 50 indicates a contraction in the sector.

Ai Group chief executive Innes Willox said many businesses covered by the survey believed slowing activity in the mining sector had affected their sales, while retailers reported a quiet January sales period.

"Business-orientated services continue to feel the weight of a slow local economy and they are also feeling the effects of a slowing in investment in mining and mining-related construction which have been a strong source of activity in recent years," he said.

"A weakening in local mining investment had always been expected at some stage during 2013 or 2014, but it is clearly coming much earlier than anticipated."

Four of the sub-sectors covered by the index expanded in January: personal and recreation services (with an index level of 56.6), health and community (50.6), finance and insurance (61.5) and cafes and restaurants (73.8).

However, activity was particularly weak in wholesale trade (34.1) and transport and storage services (34.3).