15 Sep 2008

Surveys confirm economy shrinking

9:02 pm on 15 September 2008

There is more evidence the economy is shrinking. Two separate surveys released on Monday show the manufacturing and services sectors are contracting.

Output by manufacturers dropped 1% in the June quarter due to a fall in manufactured meat and dairy production.

Statistics New Zealand says the sectors experienced a seasonally adjusted 9.4% drop in the June quarter, following rises in the previous two quarters.

A survey of the services sector by Business New Zealand and BNZ showed a contraction in activity in August as businesses struggle to cope with still high interest costs.

BNZ economists say last week's half a percentage point cut in the Official Cash Rate by the Reserve Bank should mean borrowing costs for businesses are approaching a peak.

However, they say rates have not responded as much as the Reserve Bank would have hoped because of the continuing fallout from the global credit crunch