Services include key export earners such as tourism, and big employers such as retail and hospitality. Photo: Unsplash/ Simon Kadula
- Services sector nudges back into expansion, first time in 10 months.
- Sales indicator at best level in nearly two years.
- Added to last week's manufacturing survey shows economy at turning point.
- Supports further RBNZ rate cuts.
The services sector has edged back into expansion for the first time in nearly a year as rising sales lifted hopes the key sector is on the improve.
The BNZ-Business New Zealand Performance of Services Index (PSI) rose 2.3 points on December to 50.4, the first sign the sector is getting back on track.
A reading above 50 means the sector, which accounts for about two-thirds of the economy, is growing.
"The PSI is consistent with stabilisation rather than elevation, but its latest move upwards is encouraging," BNZ senior economist Doug Steel said.
He said the improvement, along with that in the companion manufacturing survey, was a further sign that the economy was on the up, albeit in a cautious fashion.
"Economic turning points are messy, and it can be difficult to determine the exact timing of the recovery. The recovery is unlikely to be in a straight line and indicators choppy."
Services include key export earners such as tourism, and big employers such as retail and hospitality.
The index's indicators showed improved sales and stocks, flat new orders, but weaker deliveries and employment.
"Many PSI respondents in January noted uncertainty and the economic downturn as ongoing headwinds," Steel said.
That showed plenty of slack in the economy and backed the view the Reserve Bank can continue to cut its cash rate to help the economy, starting with a 50 basis point cut this week.
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
