Most businesses across services sectors in Australia continued to see reduced activity in May, although the growth of decline slowed.

The Australian Industry Group Australian Performance of Services Index rose by 4.5 points to 31.6 points in May, indicating another serious contraction in activity.

A result below 50 points indicates contraction, with lower numbers indicating a stronger pace of decline.

The reading follows a record low in April when demand all but collapsed due to widespread lockdowns to check the spread of coronavirus.

Restrictions on activity in response to the COVID-19 pandemic continue to take a large toll on most services industries, with data showing contraction in all sectors in May.

Retail sector activity fell by a further 2.1 points to 28.0 points in May, the lowest monthly result on record as restrictions have resulted in low levels of trade. The one bright spot from retail businesses was an uptick in sales for home improvement products.

Some medical and cleaning product suppliers as well as IT services also reported an uptick in demand.

Businesses providing repair and maintenance services noted a continuing demand from businesses in maintaining machinery and equipment, in order to delay new investment.

Businesses who responded later in the month expected the easing of restrictions in some states would positively impact their trade.

Separate data showed overall business conditions in May also continued to deteriorate.

The Australian Industry Group Australian Performance of Business Index lifted by 4.5 points to 31.8 in May, pointing to a further contraction in activity but at a slower pace than April’s record low.

Business conditions remained deeply impacted by the pandemic and distinctly negative across almost all sectors of the economy in May.

Rare spots of stability were evident in food, grocery and medical manufacturing, wholesaling and retailing.

“Conditions deteriorated in each of the major areas of activity – services, construction and manufacturing,” Ai Group Chief Executive Innes Willox said.

“Some of the lower pace of contraction is due to the support being provided to households and businesses, with May being the first month in which businesses received JobKeeper payments.”

He expects the gradual removal of restrictions and the further income support in the pipeline to help in rebuilding confidence and spending by consumers and businesses.

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