New Zealand's services sector growth expanded in January, led by positive employment signals and an improvement in retail trades.

The BNZ-BusinessNZ Performance of Services Index rose 2.7 points to 53.6 in January, the third highest recorded value for the month. Four of the five major sub indexes expanded.
Signs that firms are still willing to take on new workers bodes well for the outlook for the economy, with service sector firms gearing up for strong growth ahead, said Doug Steel, economist at Bank of New Zealand.

"We suspect there is underlying improvement in domestic spending underway, supported by some improvement in the labour market," Steel said. "Stronger service sector employment growth is part of this picture as is the latest lift in consumer confidence in February."

The latest PSI shows new orders/business jumped to 58.2 in January, up 0.4 points, while employment increased to 54.2, its highest level since November 2007 and the third highest level since the survey began.


Activity/sales climbed to 53.3, while supplier delivers advanced to 50.6. Stock/inventories fell 4.5 points to 47.2, its lowest level since May 2011.

The biggest gains were in retail trade, which continued to show a strong result rising to 59.2, while the health and community service picked up slightly after a weaker expansion in December, on 51.9. Wholesale trade continued to decline on 49 points and property and business services slipped further into decline on 49.5.

Northern and Central regions both posted a sub-50 result for the first time since June 2009, while Canterbury/Westland and Otago continued to improve on strong sales, orders and employment.