NZ services industry contracts a fifth month in August

Monday 15th September 2008

New Zealand's services industry contracted for a fifth month in August, reflecting a sharp drop in activity and sales. The August reading was the second-lowest on record.

The Bank of New Zealand - Business NZ Performance of Service Index (PSI) was 47.9 in August, a deterioration from the reading of 48.9 in July, and second lowest to the 45.6 level in June. A reading below 50 indicates a contraction.

Government figures on Friday showed retail sales fell a greater-than-expected 0.8% in July, adding to evidence consumer demand has weakened as the economy shrinks. Warehouse Group, the largest retailer on the NZX 50 Index, posted a 21% decline in full-year profit, citing lower demand and rising costs.

The PSI index, taken together with last week's weak Performance of Manufacturing Index, "would portend an economy that remains moribund," said Stephen Toplis, head of research at Bank of New Zealand.

Separate government figures today showed manufacturing sales volumes decreased 1% in the June quarter, mainly reflecting an 8.9% slump in meat and dairy industry sales.

The economy contracted in each of the first three quarters of this year, according to the Treasury's latest estimate.

By Jonathan Underhill

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