Service sector shrugs off global turmoil

BNZ economist Craig Ebert. Photo / supplied

New Zealand's service industry grew for a seventh month in August, shrugging off the ill-effects of plunging markets in a month when the US had its triple-A credit rating downgraded and European sovereign debt was in the spotlight.

The BNZ-Business New Zealand performance of service index (PSI) slipped 0.7 points to 53.9, remaining above 50, which marks expansion, for a seventh month.

New orders/business was the fastest growing component at 58.7, followed by activity/sales at 57.

Supplier delivers kept growing at 53.2, though employment fell to a contracting 49.2, as did stocks/inventories at 49.5.

The service sector's performance was in line with manufacturing, matching a similar result in the performance of manufacturing index (PMI), released last week.

The PSI and PMI "are consistent with a range of other business surveys that have proved remarkably robust through what has been another very difficult year - initially with the earthquakes, then globally," BNZ economist Craig Ebert said in his report.

"This was especially encouraging, for a month when the world's financial markets took an absolute hammering, uncertainty climbed, and spending decisions must have been rattled no end."

The release comes after the Westpac McDermott Miller consumer confidence survey showed people are still upbeat about the fortunes for the economy in the coming year, though less bullish about the five-year outlook.

Ebert said the upbeat data should help quell any fears about a flat second-quarter gross domestic product number this week, after first-quarter growth beat all expectations.

"More importantly, the growth indicators remain positive regards the second half of calendar 2011, some seriously so," he said.

On a regional basis, Otago/Southland's service sector shrank further to 36.9, though Northern was at 57.4, Central at 55.9, and Canterbury/Westland at 56.5.