Service sector expands for fifth month

Phil O'Reilly, CEO Business New Zealand File photo

New Zealand's service sector accelerated for a fifth straight month in June, with new orders again leading the gains, adding to evidence the economy is accelerating at a faster clip, bringing forward the timing of central bank interest rate hikes.

The BNZ-BusinessNZ Performance of Service Index edged up 1.7 points from May to 54.7.

Four of the five major sub-indexes rose in the latest month, with new orders/business climbing to 58, the highest since June last year.

Activity/sales gained to 57.7, the highest since March 2010.

The services index comes after government figures last week showed the economy expanded 0.8 per cent in the first quarter, twice the expected pace.

Figures today showed second-quarter inflation sped to 1 per cent, for an annual rate of 5.3 per cent, a 21-year high, stoking speculation the Reserve Bank will lift the official cash rate from a record low 2.5 per cent this year.

In the PSI survey, employment rose to at 51.6 from 50.8 in May. Stocks and inventories rose to 53.9, the highest since November 2007, from a contractionary 47.4 in May.

Supplier deliveries fell 0.4 points to 50. The PSI takes a reading of 50 as the cut off between contraction and expansion.

Retail trade remained in contraction at 42.5 and accommodation, cafes and restaurants was at 49.4.

Wholesale trade was 52.8, health & community services was at 56.7 and property & business services was 57.9.

The Canterbury/Westland region led growth in the latest month at 59.2, reflecting lack of supply of functioning services in Christchurch after the earthquakes.