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Service sector expands in July, holding above long-term average

New Zealand service sector activity grew at a faster pace in July, holding above its long-term average, and fuelling firms' appetite to invest back into their business.

The BNZ-BusinessNZ performance of services index rose 3.2 points to 58.4 in July, taking the year's average to 56.5 points. The service sector, which accounts for about two-thirds of the economy, has been in expansion since July 2010, and activity was led by new orders/business in the month.

"This is consistent with output accelerating to an above-trend pace," BNZ economist Craig Ebert said in his report. "It is little wonder, then, that service sector firms are looking to invest more in plant machinery and equipment while also intending to take on more staff."

New Zealand's economy has been supported by high commodity prices, escalating construction activity and inbound net migration, which spurred the central bank to raise interest rates through the first-half of the year to head off inflation.

Today's report follows the performance of manufacturing survey, which showed industrial production ebbed in July, while continuing to expand for a 22nd month. The performance of composite index, which combines the two measures, rose 2.6 points on a GDP-weighted basis to 57.5, and 1.3 points to 55.7 on a free-weighted basis.

All five sub-indices in the PSI were in expansion in July, with new orders/business up 5.3 points to 64.1 and activity/sales up 6.4 points to 61.4. Employment was at 54, stocks/inventories fell 1.9 points to 53.1, while supplier deliveries rose 2.6 points to 56.5.

Activity was positive across the country, with the Northern region up 5.5 points to 58.3, and Central at 60.1. Canterbury/Westland rose 5.2 points to 57.5 and Otago/Southland was 65.4.

(BusinessDesk)