Service sector expands in June, rounding out buoyant second quarter
New Zealand service sector activity, which accounts for about two thirds of the economy, rose in June to round out a second quarter almost as buoyant as the first three months of the year.
The BNZ-BusinessNZ performance of services index rose 0.6 points to a seasonally adjusted 54.7 in June, from 54.1 in May and down from 55.2 a year earlier. A reading above 50 indicates the sector is in expansion, while the average for the first half of the year was 56.1 points.
Today's reading comes after the PSI's manufacturing counterpart, the BNZ-BusinessNZ performance of manufacturing index rose from an 18-month low in May. Both indexes have been in expansion over the past year, but the levels have eased in recent months while remaining above long-term averages.
The composite index, which combines the PSI and PMI, was steady in June. The GDP-weighted index increased 0.6 points to 54.5, below the 55.2 reading in the same month last year, while the free-weighted index was unchanged from May at 54.1, lower than the reading of 55.3 a year earlier.
"Many economic indicators have been going gangbusters over the past 12 months, pointing to strong growth," senior Bank of New Zealand economist Doug Steel said in a note. "More recently, there have been a few hinting at some degree of cooling, but to levels that are still above average."
June's PSI reading is in line with service sector indicators in the New Zealand Institute of Economic Research's Quarterly Survey of Business Opinion for the second quarter, released last week, which showed the measure of business confidence dropped from an 18-year high, while remaining well above average, Steel said.
"It means the balance of service sector firms is still markedly optimistic, but just not quite as optimistic as they were in the first quarter," BNZ's Steel said.
All five of the sub-indexes which make up the PSI were in expansion in June, with supplier deliveries at 53.5 returning to expansion after a contraction in May. New orders/business led activity at 58.3, slightly down from May's 60.6 reading, while stock/inventories rose to 55.2, activity/sales lifted to 54.7 and employment increased to a reading of 54.2.
Across New Zealand all regions were above 50 in June, with Central leading the pack at 58.3 points, while Northern dipped to 52.8 from last year's reading of 54.9. Canterbury/Westland was 52.3 and Otago/Southland was 56.1.