Services industry contracts for fourth month in July

Monday 18th August 2008

New Zealand's services industry contracted for a fourth month in July, reflecting weak retail trade, adding to evidence the economy contracted in the first half of the year.

The Bank of New Zealand - Business NZ Performance of Service Index (PSI) was 48.9 in July, an improvement from 45.6 in June though still indicating the sector is in contraction. The retail trade reading was 46.1. Any below 50 is a contraction.

Shares of retailers have fallen more than the benchmark NZX 50 Index this year, as consumer confidence slumped and household costs rose. The PSI follows government figures on Friday that showed real retail sales dropped for a second straight quarter in April-June.

Warehouse stock fell 0.3% to NZ$3.60 today and has declined 36% this year, almost twice the decline of the NZX 50.

Retailers may face another contraction in the third quarter, says Mark Walton, economist at BNZ.

The service sector index follows a similar survey that showed manufacturing shrank in July.

By Jonathan Underhill

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