Service sector bounces in January, on events and tourism but retail slows

The sector accounts for the largest part of New Zealand’s economy.

New Zealand’s services sector expanded during the first month of 2023, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The sector accounts for the largest part of New Zealand’s economy, (in normal times) around 70 per cent of GDP and includes tourism and hospitality, transport, technology and entertainment.

The PSI for January was 54.5. This was up 2.5 points from December, and above the long-term average of 53.6 for the survey.

A reading above 50.0 indicates the service sector is generally expanding.

BusinessNZ chief executive Kirk Hope said that the January result reversed the continued drop in expansion levels seen over November and December.

However, despite the improved rate of expansion for the sector, the trend towards a higher proportion of negative comments recorded in the survey continued, he said.

In January 61.7 per cent of comments were negative, compared with 58.2 per cent in December and 47.3 per cent in November.

Business NZ chief executive Kirk Hope. Photo / Supplied

“The holiday season was a common theme, along with the shortage of labour and general market uncertainty that has been evident for some months now,” Hope said.

BNZ senior economist Doug Steel said that “as encouraging as January’s PSI result might look, we are reluctant to read too much into one month’s result – especially around the holiday period.

“The PSI trend is still cooling, judging by its 3-month moving average (53.4 in January from 54.3 in December).,” he said. Industry performance remains highly varied.”

While the events and tourism sectors were growing and clearly in recovery mode, retail trade was negative, he said.

“At an unadjusted 33.8 is the weakest January result for the sector since the PSI survey started just over fifteen years ago.”

Meanwhile, at the other end of the economy, there were further signs that the construction sector was cooling with the latest ready-mix concrete data from StatsNZ.

Ready-mixed concrete statistics provide an indicator of construction activity.

In the December 2022 quarter, the actual volume of ready-mixed concrete produced was 1.17 million cubic metres, down 9 per cent compared with the record December 2021 quarter.

In the year ended December 2022, 4.66 million cubic metres of ready-mixed concrete was produced, up 3 per cent compared with the year ended December 2021.

In seasonally adjusted terms, the volume of ready-mixed concrete fell 1.8 per cent in the December 2022 quarter, following a 1.7 per cent fall in the September 2022 quarter.