New Zealand’s Performance of Services Index rose to 51.3 in August, showing the sector expanded for the second consecutive month. The details of the report are not nearly as encouraging as the headline figure would suggest, however. Inventory growth led the metric higher, adding 5.9% from the previous month, while Sales fell -1.2% to register the first decline in four months. On balance, this looks to be a reflection of the same dynamic we have seen throughout the apparent economic recovery of recent months: companies are restocking, all the while cutting costs and shedding jobs, which boosts relative output readings but says very little about the sustainability of the rebound once government stimulus is withdrawn and private demand (increasingly ravaged by unemployment as it is) has to step in and pick up the slack.
