Service sector activity drops

CLAIRE ROGERS
Last updated 12:47 17/09/2012

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Services activity dropped off last month, and the sector is now just a whisker away from slipping into decline.

The latest BNZ-BusinessNZ Performance of Services Index shows a reading of 50 for last month, 2.4 points down from July. A reading above 50 signals activity is expanding while a score below 50 suggests the sector is contracting.

The reading was the second lowest August result since 2007.

Within the sector, employment was the index worst hit - down a sizeable 5.8 points on July to 46.5, its lowest point since June 2009.

Employment was also the worst hit indicator in the performance of manufacturing index, released last week. In that index employment was down 2.1 points to 45.4 - the lowest result since July 2009.

BusinessNZ chief executive Phil O'Reilly said that the two weak employment results combined made the worst composite employment figure since 2009.

He said the ''dead even'' PSI result for August was borne out during the recent company reporting season.

"Comments were almost split down the middle between those finding current conditions either positive or negative for activity. Like last month, a general slowdown and lack of demand continues to adversely affect some, while trying to establish the main reasons for positive business activity is difficult given the wide spectrum of comments.''

BNZ senior economist Craig Ebert said the degree of the PSI slowdown last month, ''along with the seizure in its employment component, certainly asks questions about the economy's momentum''.

Of the other four indices, three were in expansion and one in decline.

New orders/business came in at 55.4, the lowest score since December 2011.

Activity/sales slipped 0.8 points to 51. Stocks and inventories increased 0.5 points to 51.8, while supplier deliveries continued to fall, to 46.6.

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- BusinessDay.co.nz

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