Bank of New Zealand raised its estimate for New Zealand economic growth this year after robust services and manufacturing data.
The BNZ-BusinessNZ performance of services index remained robust in December even as it slowed from a month earlier, slipping 0.9 points to a seasonally adjusted 58.9 last month, according to data released today.
That's the third-highest result in 2015, and more than the average 57.8 through the year. All five sub-indices fell in December, but remained above the 50 reading that separates contraction from expansion.
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The PSI comes after its sister survey, the performance of manufacturing index, hit a 14-month high in December, with an uptick in new orders pointing to further improvements ahead. The performance of composite index, which combines the two measures, fell 0.3 of a point to 58.5 on the GDP-weighted basic, and rose 0.7 of a point to 58.0 on a free-weighted basis. The last time both measures recorded values over 58.0 was November 2007.
BNZ economists today revised up their 2016 forecast for gross domestic product growth to 2.4 percent from a previous projection of 1.9 percent, on expectations for a bigger cycle in net immigration and the sharp rebound in the domestic growth indicators over recent months.
"December's PSI wasn't far off the eight-year high it posted in November of 59.8," BNZ senior economist Craig Ebert said in his report. "When we look at the overall PSI, over a longer stretch, it becomes clear that it's been picking up the pace for a good number of years now.
"Today's PSI, combined with the 14-month high we saw in last week's PMI, is suggestive of GDP (economic) growth in the range of 3-4 percent on an annual basis," Ebert said.
The services sector accounts for about two-thirds of the economy.
Across the PSI's sub-indices, activity decreased most in supplier deliveries, down 2.2 points to 55.4. Employment fell 1.5 points to 53.6 and stocks/inventories dropped 1.6 points to 55.3. Activity/sales recorded a reading of 62.1, down 0.3 of a point, and new orders/business was down 0.1 of a point to 64.3, still firmly in expansion mode.
BNZ's Ebert said the lead from new orders/business suggests current production strength can be sustained in early 2016, despite "solid rather than spectacular" numbers for job expansion.