15 Oct 2012

Service sector contracting

7:26 pm on 15 October 2012

The service sector has contracted for the first time in more than two years - a further sign that economic growth is slowing in the second half of the year.

The BusinessNZ Performances of Services Index, which comprises more than two thirds of the economy, slid a fraction of a point to 49.6 from August's seasonally-adjusted reading of 50.

A reading below 50 indicates that the sector is shrinking. The sector comprises almost 70% of the economy and includes all service industries such as banks, accommodation, hospitality, transport and health.

Although the decline was small, it hit a broad sector of the econmy.

BNZ economist Doug Steel said the index is the latest in a series of indicators pointing to slower growth.

Mr Steel said BNZ has cut its gross domestic product growth forecast from 0.5% to 0.3%, raising the chances of a cut in the Official Cash Rate.