Service sector's growth slowed in December

Monday 25th January 2010

New Zealand’s service sector continued to expand last month, albeit at a slower pace than November, as the hospitality sector paced consumer spending during the festive season.

The BNZ-Business New Zealand Performance of Service Index (PSI) slipped 1.6 points to 54.4 on a scale where a reading of 50 separates contraction from growth.

Accommodation, cafes and restaurants expanded the most across the sectors at 58.4, though they came off a weak month in November when spending on cafes and restaurants declined 1.9%, or $7 million, according to government data.

Core retail sales unexpectedly grew 0.8% in November, led by higher liquor sales and other retailing, which includes garden supplies, jewellery, and BNZ economist Craig Ebert said this “helps set the scene for a bigger jump in Q4 retail volumes” than previously thought.

“If we’re right about a big retail expansion, in real terms, this will not only verify some ‘catch-up’ to such things as the more solid consumer confidence of late, but will provide strong support to Q4 GDP calculations,” he said in his report.

Property and business services was the only service sector to record a contraction in December at 48.7, and Ebert said he’s wary of the outlook for retail spending due to falling mortgage approvals which indicates “very soft” demand for housing.

The other sectors all expanded, with wholesale trade at 56.1, health and community services at 55.6 and transport and storage at 54.7.

The overall PSI performance was lifted by ongoing expansion in activity/sales at 55.1, down from 58.7, and new orders/business at 60, compared to 61.1 in November. Employment slipped 0.1 points to 51.1 while stocks/inventories decreased 0.3 to 50.3. Deliveries fell 2.3 points to 52.

Businesswire.co.nz

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