NZ service sector activity keeps expanding in January, driven by new orders

Monday 17th February 2014

New Zealand services sector activity, which accounts for about two thirds of the economy, expanded for a ninth month in January, underpinned by a six-and-a-half year high in new orders.

The BNZ-BusinessNZ performance of services index increased 0.5 points to 58.1, the highest level since November 2007, and was up from 53.3 a year earlier. A reading of 50 or higher indicates the sector is in expansion, while a reading below 50 indicates a contraction.

The PSI was led by new orders/business with a reading of 66.1, its highest level since June 2007, followed by activity/sales with a reading of 63.2. Employment rose 2.6 points to 55.2. Supplier deliveries fell into contraction with a reading of 47.7 from 52.9 in December, as did stocks/inventories with 45.6, down from 54.2.

"The surge in new orders fits with the other story of the latest PSI, that of inventory slimming at a rate of knots," BNZ economist Craig Ebert said in his note. "In short, service sector firms look to be caught short on this account."

Still, Ebert said that was a sign of "surprisingly strong upswing in demand."

The seasonally adjusted BNZ-BusinessNZ performance of composite index, which combines the PSI with the performance of manufacturing index, increased 0.2 points to 57.9 on a GDP-weighted basis, and was up 0.4 points to 57.4 on a free-weighted basis.

Today's PSI showed Otago/Southland had the fastest expansion at 60.2, followed by 57.9 in the Northern region, while Canterbury/Westland was at 50.1. The Central region experienced its first contraction since March with a reading of 48.6.

Retail trade remained the most positive sub-sector at 66.3, followed by wholesale trade at 62.1 and accommodation, cafes and restaurants at 61.4. Property and business services reported a 52.2 reading and transport and storage 50.1. Health and community services activity showed a contraction at 44.7, due to the summer holiday break.

BusinessDesk.co.nz

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