Buzzing services sector at 8-year high

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.

New Zealand's services sector, which accounts for about two-thirds of the economy, was at its most buoyant level in almost eight years in September.

The BNZ-BusinessNZ performance of services index rose 0.8 points to 59.3 last month, its highest level since November 2007 and extending a run of continuous expansion since August 2010.

All of the five sub-indices were above the 50 reading that separates contraction from expansion.

The improved performance in the services sector comes after a similarly upbeat gauge of the manufacturing sector last week with the BNZ-BusinessNZ performance of manufacturing index rising to 55.4, its highest level in seven months.

"Together these surveys add support to our view that economic growth will be stronger in the second half of 2015 than it was over the first half," said Bank of New Zealand senior economist Doug Steel.

The composite index, which melds the PSI and PMI, is consistent with annual gross domestic product growth of about 3.5 per cent, ahead of the 2 per cent annual growth rate forecast by BNZ, Steel said.

The latest PSI showed activity/sales increased to 63.2 in September from 61.7 in August, while stocks/inventories rose to 57.1 from 52.1, and supplier deliveries advanced to 55.2 from 55.

Meanwhile, employment slipped to 53.7 from 53.8, while new orders/business declined to 63.1 from 64.3.

The proportion of positive comments increased to 65.8 per cent in September from 59.2 per cent in August.