Services sector growth slows on weaker sales, deliveries

A fall in supplier deliveries helped push the latest performance of services index down. Photo / Thinkstock

New Zealand's services sector reported slower growth last month, reflecting weaker sales and deliveries, adding to evidence the economy is experiencing only tepid growth.

The BNZ-BusinessNZ performance of services index fell 4.6 points in July from June to 50.5 on a scale where 50 is the neutral point between expansion and contraction. The reading for July was the second lowest for that month since the survey began.

Slower growth follows the release last week of its sister survey on manufacturing, which showed that sector fell into contraction for the first time in 14 months in July. Economists increasingly are trimming their expectations for further interest rate increases by the central bank this year, on signs economic growth will lag behind the bank's own forecasts.

The PSI "was another piece of unwelcome news," said Craig Ebert, economist at BNZ. Still, recent data has been "unusually noisy" and it would be "highly premature to presume the survey confirms any stalling in the underlying economic expansion."

Three of the five sub-indexes remained in expansion mode last month. New orders/business fell 4.6 points to 54, the 15th straight month of growth, while employment was at 51.2 and stocks/inventories were at 52.3.

Activity/sales fell to 48.9, snapping an eight-month expansion while supplier deliveries fell to 48.