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Services sector sees continued growth

NZN 19/02/2017 Sophie Boot

Activity in New Zealand's services sector, which accounts for about two-thirds of the economy, rose last month to a near-record, with ongoing strength in wholesale, retail and hospitality.

The BusinessNZ-BNZ performance of services index rose 1 point to 59.5 in January, above the long-term average of 54.1, and close to the record 59.7 from September 2015.

Two of the five sub-indices increased, and all remained above the level of 50 that separates expanding activity from contraction.

"This is no one-month wonder. It continues the acceleration of late last year," Bank of New Zealand economist Doug Steel said in his report. "The PSI's three-month average has hit its highest level since the survey started back in 2007. There is swift, broad-based, growth occurring in the services sector."

New Zealand's economy has been underpinned by record levels of tourism and migration bolstering demand in the hospitality and retail sectors, coinciding with a pick-up in consumer spending.

The upbeat tone of the PSI offsets the weaker performance of manufacturing index last week, Mr Steel said. The PMI slipped in January as the building sector's momentum lost some of its 'oomph', dropping 2.6 points to 51.6, the lowest level of expansion since January 2015.

The composite index, which marries the PSI and PMI, increased 0.7 points to 58.7 on a GDP-weighted basis and gained 0.2 points to 56.7 on a free-weighted basis. Mr Steel said that points to robust economic growth in early 2017, albeit growth that is in the process of peaking.

Building consents and house sales have been slowing, warning of a drop in construction from Canterbury, Mr Steel said, though consents remained strong in Auckland and Wellington. The bank is estimating a 6 per cent drop in house sales nationwide in January, with weakening in housing turnover coinciding with slowing inflation.

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