Activity in New Zealand's services sector picked up in January, with strong sales and new orders helping to allay fears that the economy may be poised for a downturn this year.
The BNZ-BusinessNZ performance of services index rose 3.1 points to a seasonally adjusted 56.3 in January, compared to December, tracking ahead of its long-term average, and above the 55 reading this time last year. A reading of 50 separates expansion from contraction.
The activity/sales sub-index jumped 9.2 points to 61.5, and up from 59.1 in January 2018; new orders/business increased 1.8 points to 61.4, compared to 58.2 a year earlier.
Services account for about two-thirds of New Zealand's economic activity. The sector grew 0.5 per cent in the September quarter, half the pace of growth in the June quarter and down from 0.7 per cent in September 2017. That was largely due to shrinking production in information media and telecommunications, and transport, postal and warehousing. There was also a sharp slowdown in retail trade and accommodation.
Bank of New Zealand senior economist Craig Ebert said today's performance of services index, or PSI, will go some way to alleviating fears of a slowing economy as it indicates GDP growth is tracking at around trend rather than below it.