3 days ago
'Early signs of life in the economy' despite services contraction
The services sector continues to shrink.
Photo:
mrdoomits/123RF
The services sector continues to shrink, albeit at its slowest pace in three months, as firms' sentiment turned less sour.
The
BNZ - BusinessNZ Performance of Services Index (PSI)
rose 1.3 points to 48.9 in July, compared to June's 3.3-point rise on the back of a dismal May.
Anything below 50 points indicated contraction, and the index remained well below its long-run average of 52.9 and in contraction for 17 consecutive months.
BNZ senior economist Doug Steel said that "combined with
recent improvement in the Performance of Manufacturing Index (PMI)
, electronic card transactions and ANZ's Truckometer, there are accumulating early signs of life in the economy".
Four of the five sub-index results showed improvement, but sales and deliveries remained in contraction, while new orders held steady and stock levels expanded.
Employment remained the weakest link, falling again and has been in contraction for 20 straight months.
"As New Zealand's largest employer, the service sector has a major bearing on the broader labour market," Steel said.
But he said, as was often in any sort of economic recovery, the labour market tended to take longer to recover.
Firms were also less negative in July, but said consumers spent less due to high interest rates and cost-of-living issues, and cited other challenges like weather and rising costs for their negative future outlook.
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