Australia February Services Industry Contracts at Slower Pace

March 3 (Bloomberg) -- Australia’s services industry shrank in February at a slower pace amid rising demand among banks and transport companies.

The performance of services index rose 0.9 points to 48.3 from January, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. A figure below 50 indicates the industry is shrinking.

Central bank Governor Glenn Stevens, who boosted borrowing costs yesterday for the fourth time in five meetings, may pause next month to gauge the impact of previous increases, according to 19 of 22 economists surveyed by Bloomberg yesterday. Employment and supplier delivery levels contracted as firms cited “soft” consumer and business confidence in February, today’s report said.

“Consumer-related services sectors bore much of the brunt of the cumulative impact of the consecutive interest-rate rises and the gradual withdrawal” of government spending, said Australian Industry Group Chief Executive Heather Ridout.

The index has fallen every month since October, when it hit the highest level in 19 months.

Stevens began increasing the overnight cash rate target at the start of October, taking it to 4 percent yesterday from a half-century low of 3 percent.

Today’s report also suggests the impact of more than A$20 billion ($18 billion) in cash handouts to households from Prime Minister Kevin Rudd has waned. Most of the handouts were completed in the first half of 2009.

Services businesses are looking to further improvement in Australia’s labor market to boost “household discretionary spending in the face of yesterday’s interest-rate rise,” Ridout said.

Today’s report, which is based on a poll of about 200 companies, is similar to the U.S. non-manufacturing ISM index.

The report measures sales, new orders, deliveries, inventories and employment for companies such as banks, real estate agents, insurers, restaurants, transport firms and retailers to compile the overall performance of services index.