Australia services industry activity falls in July

CANBERRA, Aug 3 (Reuters) Activity in Australia's services sector fell in July due to weak demand and employment growth and a steep decline in supplier deliveries, a private survey said on Thursday.

The Australian Industry Group-Commonwealth Bank Performance of Services Index (PSI) fell 2.2 points in July to 50.4, remaining just above the 50 threshold.

A reading above 50.0 indicates the sector is expanding, while a reading below 50 indicates a contraction.

''After picking up strongly in early 2006, growth in the services sector has moderated in the past three months, with renewed weakness particularly evident in the consumer-related sectors,'' Australian Industry Group Chief Executive Heather Ridout said in a statement.

''The Reserve Bank's announcement yesterday of another rise in interest rates will only squeeze households further, leaving the prospects for economic growth hinging on a precariously few areas of spending.'' The survey of about 200 companies found activity expanded in five of the nine sectors in July, down from seven in June.

The strongest expansion was in personal and recreational services.

The strongest fall was in retail trade, although the survey said the result could be partly attributable on a large mid-year sale at a major department store which drew sales away from other stores.

The employment index fell 1.0 points in July to 50.2.

REUTERS VJ RK0525