Pick-up in services, manufacturing to contain any economic slowdown

Monday 19th November 2018

Increased services and manufacturing activity last month will likely keep any third-quarter economic slowdown short-lived.

The BNZ-Business NZ performance of services index rose 1.2 points to 55.4 in October, its highest level in five months and above the long-run average of 54.5. The PSI followed a similar recovery in its sister survey - the performance of manufacturing index - released last week. Any reading above 50 indicates growth.

The composite index - which combines both indices - increased 1.4 points on a GDP-weighted basis to 55.2 and was up 1.3 points on a free-weighted basis to 54.5.

"Combined, they were starting to form a picture that any near-term slowdown in economic growth will likely be contained," Bank of New Zealand senior economist Craig Ebert said in a note. "Not that we are expecting a slowdown in GDP growth in the near-term."

BNZ predicts gross domestic product expanded 0.8 percent in the September quarter, and will maintain that pace of growth in the fourth quarter. That compares to the Reserve Bank's forecast for 0.7 percent expansion in the third quarter slowing to 0.5 percent in the fourth quarter.

Among the PSI components, activity/sales rose 1.6 points to 57.8 and new orders/business climbed 1.7 points to 57.9, while employment jumped 4.3 points to 54.

Ebert said the improvement in the employment components in both the PSI and PMI alleviated fears the labour market might have been stalling after stronger than expected jobs data.

Among the other components in the PSI, stocks/inventories slipped 1.6 points to 52.2 and supplier deliveries were down 1.1 points to 51.2.

(BusinessDesk)

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