NZ services industry shrinks a 9th month; employment falls

Monday 26th January 2009

New Zealand's services industry contracted for a ninth month in December, with little pick up in what is typically a peak month for retailers.

The Bank of New Zealand - Business NZ Performance of Services Index (PSI) gained to 48 last month from 47.3 in November. It reached a record low of 45.6 in June. A reading below 50 indicates a contraction.

The PSI figures aren't seasonally adjusted and the pick up from the previous month probably reflects a peaking of activity for manufacturers and retailers gearing up for the Christmas rush, according to BNZ markets economist Mark Walton. Retail sales were unchanged in November and consumer spending on credit and debit cards, excluding auto-related purchases, gained 0.2% last month, according to government figures.

"While December's 'improvement' is welcome, the underlying story is still much weaker than the headline suggests," Walton said.

The December 2008 reading is down from 53.9 for the same month a year earlier, which suggests "a slowdown much more in keeping with the recessionary backdrop currently in place."

The economy fell into its first recession in a decade last year and some economists predict GDP will shrink for five quarters before reviving. The central bank is expected to slash the official cash rate by 100 basis points to 4% on Thursday and some economists expect further cuts taking the OCR to 3% by mid-year.

Within the PSI, four of the five diffusion indexes contracted last month. Activity/sales slipped to 45.2 from 45.7 in the previous month, while employment dropped to 46.2 from 49.5. New orders picked up to 49.8 from a record low 45.9 and stocks/inventories fell to 49.2 from 51.1. Deliveries turned positive, climbing to 51.4 from 46.6.

By Jonathan Underhill

Comments from our readers

No comments yet