Australian Services Gauge Contracts for Fourth Consecutive Month

Australia’s services industry contracted in May for a fourth straight month as Europe’s debt crisis and signs of slowing Chinese growth hurt confidence, a private survey showed.

The performance of services index was 43.5 last month compared with 39.6 in April, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction.

Reserve Bank of Australia Governor Glenn Stevens will lower the benchmark interest rate to 3.5 percent today, according to most economists surveyed by Bloomberg. The RBA lowered rates half a percentage point last month after a high currency hurt prospects for manufacturing, retailing and tourism industries.

“Global uncertainties have further shaken business and household confidence and this is reflected in slower sales and falling employment,” Innes Willox, chief executive officer at AIG, said in a statement. “There is little sign to date of any respite flowing from the reduction in interest rates or from the easing in the level of the dollar over recent weeks.”

The local currency has gained 38 percent against the U.S. dollar since the start of 2009 and reached $1.1081 on July 27, the highest level since it was floated in 1983.

It has since retreated as signs mount that Europe’s debt crisis will sap global growth. The currency dropped 6.7 percent last month after the central bank unexpectedly cut its benchmark interest rate by half a percentage point and as data from China, Australia’s biggest trading partner, indicates a slower expansion.

Sales, Orders

Today’s report showed the index’s gauge for sales surged to 46.1 from 33.8, and the reading for new orders advanced to 40.4 from 35.8. The employment indicator fell to 44 from 46.6, the report showed.

Selling prices dropped to 43.8 from 45.9, while the wages measure improved to 56.8 from to 53.3, the report showed.

Today’s report, 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.