New Zealand's services sector activity rose to a six-month high in January as record inward migration boosted demand for housing, increasing the need for property-related services.
The BNZ-BusinessNZ performance of services index rose 1.1 points to 57.8 last month from December. The service sector, which accounts for about two-thirds of the economy, has been growing since July 2010, based on the PSI, where a reading above 50 indicates expansion.
Across the PSI's sectors, three out of four were in expansion. Activity in property and business services showed the only increase at 53.6 in January. Wholesale trade dropped 9.3 points to 53.8, accommodation, cafes and restaurants fell 6.8 points to 54.1, and health and community services slipped into contraction with a reading of 49.5.
Last year, New Zealand's burgeoning economy attracted a record influx of people at the same time as fewer Kiwis depart for Australia. That helped push up local demand for items such as vehicles, where sales rose to a record last year, and kept wage inflation low. The central bank is keeping a close eye on the effect on the housing market amid concerns that a lack of supply will cause house prices to spike, creating financial instability.
"The relative health in the latest PSI gels well with a burgeoning labour market, high net inward migration and a reheating housing market," said BNZ senior economist Craig Ebert.
