The Australian services industry continues to deteriorate amid consumer concern over spending cuts announced in the federal budget.
The industry has now contracted for four consecutive months, the Australian Industry Group says.
Ai Group's Performance of Services Index (PSI) fell 2.3 points in June to 47.6 points, below the 50 level separating expansion from contraction.
It appeared likely to be at least several months before momentum would rebuild in the sector, said Ai Group chief executive Innes Willox.
"Conditions in the services sector slipped again in June with respondents to the latest Australian PSI survey suggesting that ongoing weakness across much of the domestic economy and the public reception of the federal budget are dampening consumer and business confidence," Mr Willox said.
Survey respondents said recent deterioration in manufacturing conditions was reducing demand for business-to-business services like accounting, IT and personnel services, Mr Willox said.
Just three of nine sub-sectors experienced growth in June, including health and community services and finance and insurance.
Hospitality also expanded, for the first time since April last year, possibly due to the warmer weather this autumn.
But retail trade and wholesale trade continued to contract, pointing to further weakness in household spending, Mr Willox said.
"Feedback from participants in both the retail and wholesale trade sub-sectors suggests that discretionary spending remains weak in June with proposed federal budget changes to welfare, family payments and public sector employment continuing to weigh on consumer confidence," the survey said.
"Unseasonably warm weather in autumn has also depressed sales of winter clothing and appliances in many parts of the country."
Services employment also contracted for a fourth month in June, although it did improve slightly.
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