20 Jul 2009

Services sector activity still declining

1:43 pm on 20 July 2009

Activity in the services sector has declined for the 15th consecutive month.

The BNZ Capital-Business New Zealand Performance Services Index stood at 45 in June, down slightly from last month and the 15th consecutive month of contraction. A reading below 50 indicates activity is declining.

The services sector is a growing proportion of the economy, and while it has held up well compared to manufacturing, it is not immune to the recession.

Sales declined, firms still want to shed workers and inventories are at their lowest levels since the survey began.

But the drop in stocks has prompted a rise in new orders for the first time since March, which the BNZ says is a good sign for future production.

BNZ Capital senior economist Craig Ebert says the health of the sector varies widely.

Some sectors, like real estate and insurance, have expanded, though he says that may reflect the difficulty of getting through the downturn rather than growth.

Other sectors are struggling, including retailing, accommodation, cafe and restaurants, while car wholesaling, air freight, road freight and communications spending slumped.