Buoyant sector continues to serve up strong numbers

The services sector index rose 0.1 to a seasonably adjusted 58.2 last month - its highest level since July 2014. Photo / NZME.

New Zealand's services sector, which accounts for about two-thirds of the economy, was at its most buoyant level in 11 months in June.

The BNZ-BusinessNZ performance of services index rose 0.1 to a seasonally adjusted 58.2 last month - its highest level since July 2014, and extending a run of continuous expansion since October 2009. All of the five sub-indices were above the 50 reading that separates contraction from expansion.

The improved performance in the services sector comes after a similarly upbeat gauge of the manufacturing sector last week. The BNZ-BusinessNZ performance of manufacturing index rose to a seasonally adjusted 55.2 - the highest level since February with all components in expansion.

"Whether parsed by region, industry type, or firm size, every bit of the PSI was in expansion mode, which is rare," said Bank of New Zealand senior economist Craig Ebert.

"Combined with the improved PMI reading for June, the latest PSI paints a picture of an economy expanding robustly, probably a little better than average."

The performance of the composite index, which combines the two measures, increased 0.6 of a point to 57.8 on a GDP-weighted basis, and rose 1.5 points to 57.2 on a free-weighted basis - the closest the two measures have been to each other since December last year.

While the current measures were buoyant, economists expect New Zealand's economic growth to slow as weaker commodity prices weigh on exports and earnings.

The Reserve Bank is expected to reduce the benchmark interest rate by 25 basis points this week to bolster the economy, with further cuts predicted before the end of the year.

The latest PSI showed activity/sales weakened to 60.2 in June from 62.9 in May, while new orders/business dropped to 63 from 63.1. Employment slipped to 54.2 from 56.3, while stocks/inventories advanced to 53.4 from 50.5, and supplier deliveries to 56.1 from 49.9.