Service sector expands in August, retail trade subdued

New Zealand service sector activity expanded in August, with employment at its highest level since the survey began in 2007, though retail trade was subdued in the month.

The BNZ-BusinessNZ performance of services index slipped 0.5 points to 57.9 in August, and was up from 53.7 in the same month a year earlier. The service sector, which accounts for about two-thirds of the economy, has been in expansion since July 2010, where a reading above 50 indicates increased activity.

"While business optimism has moderated over recent months, confidence within the services sector has held up relatively well," BNZ economist Craig Ebert said in his report. "Resilience in the services sector was certainly the motif of August's performance of services index."

Last week the Reserve Bank said it anticipates economic growth to moderate after recent declines in commodity prices, forecasting gross domestic product to expand 3.6 percent in the March 2015 year.

Today's survey follows the BNZ-BusinessNZ performance of manufacturing index on Friday, which showed industrial production activity picked up in August. The performance of composite index, which combines the two measures, was unchanged at 57.6 on the GDP-weighed index, and rose 1.1 point to 57.2 on a free-weighted basis.

All five sub-indices of the PSI were in expansion in August, with employment at a record 56 level, while stocks/inventories were at their second-highest reading of 59. New orders/businesses was at 58.5 and activity/sales at 57.6.

Most sub-sector activity grew in the month, with wholesale trade at 57.8, health and community service at 57.3 and property and business services at 56.8. Retail trade was one of the few to report a contraction at 47.4.

Government figures last week showed core retail consumer spending on electronic cards rose 0.6 percent in August, led by increased expenditure on hospitality.

The PSI showed increased activity across the country, with the Northern region at 57, Central at 56.2, Canterbury/Westland at 51.9 and Otago/Southland at 55.8.

(BusinessDesk)