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NZ services sector slogs its way through November

NZ services sector slogs its way through November

By Peter Kerr

Dec. 20 (BusinessDesk) - The services sector, which makes up about 70% of New Zealand's economy, remained sluggish in November and virtually unchanged from the previous month.

The BNZ-BusinessNZ Performance of Service index stood at 51.4 last month, up 0.2 from October and the second-lowest November figure since the survey began in April 2007. A figure above 50 points indicates services activity is expanding, below 50 indicates it is contracting.

BNZ economist Doug Steel said the economy still seems to be in recovery mode, with the flat result more of a pause in the broader recovery process. Other indicators for the fourth quarter such as car registrations, business confidence and activity, electronic card transactions and even house sales are among sign's the economy's perking up a bit he said.

"The detail provides a bit more support to the idea that economic growth will pickup into 2011," he said. "It is certainly pleasing to see new orders leading the charge among the component indices. This promises a rise in activity ahead."

New orders/business improved by 1.3 points from October to 54.4 in November, the only sub-index to show expansion. Supplier deliveries fell 2.6 to 47.5, employment dropped 0.6 to 48.8, stocks/inventories was largely unchanged at 49.9, while activity/sales dropped 2.5 points to 50.5.

Steel said that one promising sign that general economic activity is improving came from the transport sector which lifted to 61.6 in November, its highest level since mid-2007.

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"It seems to be the productive, non-spending sectors that are doing better, and driving the transport indice," Steel said. "It looks like it might be a bit export driven, and supports our view of an economic rebalance."

The figure is all the more impressive given rising fuel costs, and fits in with other transport indicators such as rising vehicle registrations and government tax revenue from road user charges.

Novembers' PSI figures indicate strong regional variation, with unadjusted figures demonstrating North Island expansion and South Island decline. The northern region's figure was 55.9, and central close behind at 55.3.
Canterbury/Westland fell 0.4 points to 44.6, while Otago/Southland fell 0.8 to 44.7, and has contracted for seven of the past eight months.

There were strong regional differences in retail spending patterns too said Steel.

October retail sales in the rest of the South Island outside Canterbury/Westland were 11.4% lower than a year before, pulling total retail sales in the South Island down 4.3% over the year. In contrast, retail sales in the North Island rose 2.2% over the same period, although provincial North Island did record a significant 5.1% drop.

Some of this may be due to tourism influences. Total guest nights at commercial accommodation establishments in October were 1.7% lower than a year before. However South Island guest nights were 5% lower in the same month than a year before, while guest nights in the North Island rose 0.5%.

Steel said there is enough evidence that the economic recovery is on trend, "even if there is patchiness across sectors and regions."

(BusinessDesk)

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