South again tops service industry performance

The New Zealand services sector had a vintage 2015 and the December reading of 58.9 points was the third-highest of the year, according to the BNZ-BusinessNZ Performance in Services Index.

Otago-Southland was again the top-ranked region, on 68.8 points.

A reading above 50 is generally expanding and below 50 shows a region in decline.

Otago-Southland has been helped by the influx of tourists to the region in the past year as the extra flights into Queenstown Airport bumped up the number of visitors.

Northern, which includes Auckland, had the second-highest reading in December at 61.3, Canterbury-Westland was next on 56.1, followed by central on 53.1.

The regional numbers are not seasonally adjusted.

BusinessNZ chief executive Phil O'Reilly said December's result capped off a healthy year for the sector.

Expansion in the sector averaged 57.8 last year, compared with 56.5 in 2014 and 55.8 in 2013.

"This was certainly helped by the key indicators of activity/sales and new orders/business showing strong growth throughout most months.''

BNZ senior economist Craig Ebert said when the services index was examined over the long term, it became clear it had been picking up the pace for several years.

The December reading was not far off the eight-year high posted in November.

"Like we saw in the latest Performance in Manufacturing Index, it was being led by new orders, with the PSI index on this heaving away at 64.3. This suggests the currently strong pace of production in the PSI can be sustained into the early part of 2016.''

The jobs expansion denoted in the PSI remained solid rather than spectacular.

However, it was a further sign the fall seen in the third-quarter Household Labour Force Survey employment measure was a statistical anomaly, Mr Ebert said.

The importance of the service sector in maintaining economic growth was highlighted in the 2015 third-quarter national accounts.

Published on December 17, and after the previous PSI report for November, the accounts showed a 2.9% annual increase in real services output compared with overall production GDP growth of 2.3%.

The GDP definition of services sector comprised two-thirds of total GDP in volume terms, he said.

"If two-thirds of the economy can keep expanding at a solid clip - probably faster than the average now, if one looks at the recent PSI performance - there's a good change overall GDP growth can post solid rates of growth without too much trouble.''

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