13 Feb 2023

Services sector expands in January, reversing slowdown

2:06 pm on 13 February 2023
Magnifying glass over Jobs section of newspaper classifieds

BNZ senior economist Doug Steel says employment has bounced back into expansion, despite the well-documented labour shortages. (file image) Photo: 123rf

The services sector expanded at a faster rate in January, reversing a slowdown in expansion during the tail end of last year.

The BNZ-Business New Zealand Performance of Services Index (PSI) increased 2.5 points last month to 54.5 - above its long-term average of 53.6.

A reading above 50 indicated the sector was in expansion.

New orders slipped to its lowest level in six months, although it remained in positive territory.

But BNZ senior economist Doug Steel said employment had bounced back into expansion, despite the well-documented labour shortages.

"The fact that there is more employment in this survey suggests they have found someone, but I don't think it necessarily means there is more demand for labour," Steel said.

"It's more likely that the demand for labour that's been extreme is being satisfied. I suspect that has to do with what looks like a very strong increase in net migration towards the end of last year," he said.

Steel said while January's PSI was positive, the overall trend suggested activity was cooling.

BusinessNZ chief executive Kirk Hope said the labour shortage was still a sore spot for the sector.

"Despite the halt in lower expansionary levels, the trend of a higher proportion of negative comments continued in January (61.7 percent), compared with 58.2 percent in December and 47.3 percent in November," Hope said.

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