NZ services sector lifts after two months' decline

Strong sales and new orders in November led to lift in the performance of the service sector.

New Zealand's services sector activity, which accounts for about two-thirds of the economy, advanced in November, snapping two months of declines, led by increases in sales and new orders.

The BNZ-BusinessNZ performance of services index lifted 0.7 points to a seasonally adjusted 56.4 last month, above its long-term average of 54.4. All of the five sub-indices were above the 50 reading that separates contraction from expansion. The survey's new orders/business sub-index posted the highest reading, lifting to 60.7 from 60.3, while activity/sales advanced to 60.5 from 58.2.

"Strong sales were a feature in November and look set to continue, judging by the ongoing robustness in new orders," Bank of New Zealand senior economist Doug Steel said in his report.

"The new orders index has posted its seventh consecutive month above the heady level of 60."

Still, Steel noted that the survey's employment sub-index continued to be "a relatively softer component of the PSI" in November as it had in October, recording the lowest reading of 50.6 from 51 in October.

"This may still reflect a period of caution post-election or may be a consequence of employers having difficulty finding appropriate staff," he said.

"It suggests overall employment growth will be markedly slower in Q4 compared to the massive 2.2 per cent gain recorded in the official figures for Q3.

"Steel also noted the 'big jump' in the stocks/inventory sub-index, which lifted to 58.1 from 51.3. An inventory build suggests some vulnerability if demand were to unexpectedly slow," he said.

Meanwhile, the supplier deliveries sub-index advanced to 53.2 from 52.9. BNZ's Steel said positive signs were widespread across the PSI with expansionary readings seen in the results across all industries, regions, sub components and firm sizes, with particular strength in Otago/Southland and large firms.

The PSI comes after its sister survey, the performance of manufacturing index, showed manufacturing activity continued to expand in November up 0.4 of a point to a seasonally adjusted 57.7. The composite index, which combines the two surveys, advanced 0.6 points to 56.5 on a GDP-weighted basis and gained 0.8 points to 57.7 on a free-weighted basis.