NZ service sector activity at 8-year high in November, stoking growth expectations

Monday 14th December 2015

Activity in New Zealand's services sector, which accounts for about two thirds of the economy, expanded at its fastest pace in eight years in November, underpinning expectations those industries drove growth through the second half of the year.

The BNZ-BusinessNZ performance of services index rose to a seasonally adjusted 59.8 points in November from 56.2 in October, the highest since November 2007. All of the five sub-indices were above the 50 reading that separates contraction from expansion.

"We expect the services component of GDP (gross domestic product) will print well over the second half of 2015," Bank of New Zealand senior economic Craig Ebert said in his report. BNZ expects data this week will show the economy grew 0.6 percent in the third quarter, and "there could well be upside to this, if the recent resurgence in the PSI is anything to go by."

Last Friday, the PSI's sister survey, the performance of manufacturing index, showed activity picked up in November, suggesting the economy expanded at a faster pace in the second half of the year.

The performance of composite index, which combines the two measures, increased 2.8 points to 58.7 on the GDP-weighted basic, and edged up 2.5 of a point to 56.8 on a free-weighted basis.

The latest PSI showed new orders/business and increased activity/sales drove expansion in the services sector last month, with readings of 64.2 and 62.3 respectively. Supplier deliveries recorded a reading of 57.7 and stocks/inventories 56.9, while employment rose to 55.1 from 52.7 in October.

The proportion of positive comments reached 71 percent in November, from 61.8 percent in October.

BusinessNZ chief executive Phil O'Reilly said some seasonal patterns were "obviously at play," but general comments "centred on a steady stream of activity and opportunities for growth."

BusinessDesk.co.nz

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