Given the increasing signs of a slowdown in the Australian economy, it is becoming increasingly likely that the RBA will not hike rates again in this cycle, even if the 2Q08 inflation numbers are worse than expected. The latest piece of information on that front came from today's AIG/Commonwealth Bank Performance of Services index.
The headline number fell to 45.4 well below the 50 level which seperates expansion from contraction. In addition to the headline number, as shown below Sales, Employment, Inventories, New Orders and Deliveries all fell below the 50 level signalling contraction.
Services sector activity slowed further in June, with record petrol prices and high interest rates continuing to stifle consumer and business demand.
Firms pointed to weak consumer confidence and concerns over future economic growth as major contributors to the soft levels of activity.
Activity was weak across a wide range of both consumer and business-related sectors.
The rising price of oil led to the fastest rate of input cost growth since the survey’s inception.
Victoria was the only state to record growth in services, with activity falling in all other states, except South Australia where it was steady.
Seasonally adjusted, activity expanded in just two of the nine sectors in June (down from four in the previous month).
You can click on the link above for the full report but good luck finding much in the way of positive data. Combined with the manufacturing report released on Tuesday, there now can be no argument that the RBA's rate hikes, higher food and energy costs and lower business and consumer sentiment are taking their toll on the Australian economy.