Doug Steel: BNZ Senior Economist on the services sector expanding in the BNZ-BusinessNZ Performance of Services Index
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Why is the services sector expanding for a third straight month?
to the ever-expanding economic recovery in this country services sector as andrew outlined remains in expansionary mode it's now the third straight month we're heading in the right direction it seems bnz business new zealand index 51.2 in august strongest number since september of 2023 doug steel's senior economist at the bnz he's back with us doug morning morning mike how are you very well indeed thank you new orders at 55.2 that's forward looking that's got to be a good sign doesn't it
Yeah, it's a good sign. 55.2, as you say, that's the strongest new orders we've had in more than three years. It is the bright spot on the survey and gives us hope that the recovery
is going to broaden ahead. How much are the good numbers associated with the export sector?
Yeah, I think that's a pretty key driver of things picking up, especially the primary export sector. side of things. The prices that the likes of sheep, beef, dairy, kiwi fruit, they're getting really strong. Good returns coming in and that's It's driving activity in various parts. If you look at the PSI indicator for transport and storage, for example, up at 64.1, I think that's got strong rural links and that's certainly bolstering things.
Are we seeing a big delineation between the rural provincial slash and downtown story, Auckland and Wellington?
How are primary exports driving the recent services‑sector growth?
Is Auckland and Wellington dragging us or not?
Yeah, I think that's been a feature for the last few years, really, where urban has been struggling, especially the big cities of Wellington and Auckland, and the rural and or South Island has been going much, much better. And we're seeing more signs of that. Maybe with these new orders, we're starting to see some improvement in the bigger cities, but it's been slow going to date, that's for sure. Or you can sort of put it through another lens. If you look at anything connected to the consumer, Obviously, the big cities being big part of that. That has been weak retail, accommodation, those sorts of things.
Those are the numbers that we're getting this morning, though, the migrant numbers from yesterday, the tourism numbers. They have got to feed in eventually to the city, don't they?
Yeah, eventually. But you sort of look at those tourism numbers and driven by Australians skiing.
Is there a clear split between rural‑provincial and big‑city performance?
I don't think too many ski fields in Wellington or Auckland. So clearly, clearly, Queenstown is going pretty good. and part of that South Island story as well. I think the big thing that you just mentioned too with oil and what we're paying, even though it might be a little bit less than in the UK, it's certainly putting the squeeze on here, and the cost of living has crimped disposable income for the consumer, and that has come through the various service sectors.
On jobs, 49.4, so 50 or above is expansion rate. 49.4, we're close. When does jobs turn?
Yeah, it's getting less bad. I don't know if that's the best we can say at the moment, but those new orders and pickup in the overall PSI suggest that there is improvement underway in terms of activity. It takes time before businesses push the button and say, we're going to hire more staff. I think we're getting there. It just hasn't shown up in the numbers yet.
What impact are higher oil prices having on consumer disposable income and services?
Yeah. Speaking of numbers, Thursday, Q2, what's yours? Zero point what?
We've got 0.2 for the second quarter GDP. A small positive, but really I think a subdued quarter. Obviously the second quarter was when the oil shop hit first or hardest. So that's going to be a drag. If we can post any growth when that's happening, I think that's actually quite
remarkable. I'm glad you said that because we had the Prime Minister on yesterday and he seemed a bit doer about it. I mean, if you've got growth in the war quarter, that's a story of resilience, isn't it?
Well, I would say any... Anything that isn't going backwards, and even if it is a small minus, if you look at compared to a year ago, we think it's going to be more than 2% up.
When will the improvement in new orders translate into stronger job creation?
It's actually quite an awkward place to be talking about the economy because economists like me will start talking about recovery as we are, and everyone sort of feels like, I don't feel like it.
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Chapters
6 chapters
1
Why is the services sector expanding for a third straight month?
0:00–1:22
2
How are primary exports driving the recent services‑sector growth?
1:22–2:12
3
Is there a clear split between rural‑provincial and big‑city performance?
2:12–3:10
4
What impact are higher oil prices having on consumer disposable income and services?
3:10–3:51
5
When will the improvement in new orders translate into stronger job creation?
3:51–4:25
6
What does the modest Q2 GDP growth tell us about New Zealand’s economic resilience?
4:25–4:45
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