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Activity in the Australian services sector has edged only marginally higher in December, with households wrapping up the year on a cautions note due cost of living pressures.

The Australian Industry Group’s Performance of Services Index (PSI) rose 0.3 points to 52 points in December, remaining above the 50-point level signifying expansion.

Four of the nine sub-sectors expanded, the PSI shows, but contraction in a further four kept overall growth in check.

Ai Group chief executive Innes Willox said that while overall growth had expanded in the services sector, declines in the retail, health, transport and communication service sub-sectors kept the month’s gains modest.

The retail trade sub-sector index moderated to 44.5 points, indicating a further deterioration in conditions, and marking a 10th straight month of flat or declining activity, according to the PSI.

Retail businesses blamed a lack of consumer confidence and cautious attitude to spending due to cost of living pressures.

‘Service businesses will be looking for a lift in consumer confidence and household spending as the new year unfolds,’ Mr Willox said.

‘The failure to improve in December reflects ongoing weakness in local consumer spending, even at this busiest and most profitable month of the year for local retailers.

‘Rising energy costs have become a widespread cost pressure, with participants reporting that energy costs are eating into margins across almost all services sub-sectors in recent months.’

Of the PSI’s five activity sub-indexes, new orders, employment and supplier deliveries expanded, while sales fell and stocks (inventories) were roughly stable after falling in November.

Employment growth accelerated slightly, with this sub-index up 0.6 points to 52.7 points in December.

The sub-index has expanded or remained stable throughout 2017 reflecting stronger monthly jobs growth in the Australian Bureau of Statistics (ABS) jobs data.