The service sector is going backwards for the first time in more than two years. The service sector is going backwards for the first time in more than two years.
It was a "red start to spring" according to the BNZ - Business New Zealand Performance of Service Index for September.
The index stood at 49.6 points on a seasonally adjusted basis, down marginally from 50 in August. A figure under 50 indicates the sector is contracting, and above 50 that it is expanding.
It was the first time the index contracted since July 2010 and signals an economic slowdown in the second half of the year, after a solid first half.
The PSI - is a monthly indicator of levels of activity in the country's services sector - was down significantly from a reading above 56 points just four months ago. Service industries account for 71 per cent of New Zealand’s GDP.
BNZ economist Doug Steel said, “The soggy September Performance of Services Index adds to recent indicators suggesting slower economic growth in the second half of 2012, following what was a very solid performance in the first half. We are more convinced that growth has slowed. The question remains whether it can bounce back through 2013 as generally positive consumer and business expectations suggest it will.”
The latest figures showed three sub-indexes in contraction in September: activity and sales down to 49.1 points (contracting for the first time since the end of last year), employment remaining in the red at 48.5 points and supplier deliveries at 48.6 points (though both sub-indexes were slightly better than the previous month).
The stocks and inventories index showed expansion at 52.6, leading the way for the first time since late 2008. New orders remained in positive territory too, at 52 points, although that is trending down.
BusinessNZ chief executive Phil O’Reilly said that even though the September result was only a minor dip into declining waters, the trend over recent months indicated this was no real surprise.
“Given new orders/sales had been slipping for the last three months, this had also affected activity/sales levels. Combined with stagnating employment and supplier deliveries, results meant the overall PSI would struggle to reverse declining levels of expansion over the mid part of 2012.
“The next question then becomes whether further declines in activity will occur in the months leading up to Christmas? While we would hope that Xmas provides some uplift, comments from respondents outline a general sense of tough times in the business community, with reduced demand/activity a common thread.”
Data released last week showed the Performance of Manufacturing Index was also in contraction, sitting at 48.2 points in September.
- © Fairfax NZ News