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NZ services sector activity outshines manufacturing in December slowdown

Tuesday 23rd January 2018

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New Zealand's services sector activity, which accounts for about two-thirds of the economy, eased in December but held up better than its sister manufacturing index, suggesting the sector is less concerned about the new government. 

The BNZ-Business NZ performance of services index fell 0.5 points to a seasonally adjusted 56 last month. All of the five sub-indices were above the 50 reading that separates contraction from expansion. Activity averaged 56.9 in 2017, up from 56.6 a year earlier.

In December, the survey's new orders/business sub-index declined to 60.4 from 60.8, while activity/sales fell to 58.4 from 60.4. Stock/inventories dropped to 50.9 from 58.6 while supplier deliveries was 50.1 versus 53.1. The only sub-index to rise was employment, which increased to 55.8 from 50.7. 

Bank of New Zealand senior economist Craig Ebert said the "above-average outcome was doubly significant, considering the Performance of Manufacturing Index decelerated sharply in December. Had the PSI done so too, we would have been much more concerned that the economy might be choking back a bit, following the election".

General business sentiment has been gloomier since the formation of the Labour-led government as firms wait to see what impact new policies will have on things such as industrial relations, the labour market and trade as well as the property market.

Today's release follows its PMI sister survey, which showed manufacturing activity fell 6.5 points to a five-year low 51.2 in December as businesses deferred major decisions until they have more clarity after the change in the government.  

Ebert said "ongoing robustness in the PSI suggests the more day-to-day business keeps ticking over relatively well."

The composite index, which combines the two surveys, fell to 55.4 from 56.5 on a GDP-weighted basis and to 54 from 57.5 on a free-weighted basis.

(BusinessDesk)

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