19 Nov 2013

Economists might have to revise forecasts

7:06 am on 19 November 2013

Strong growth in the services sector could see economists upwardly revising their forecasts.

Activity in the services sector is at its highest level in six years, driven by an expanding economy.

The Bank of New Zealand - Business New Zealand Performance of Services Index rose 2 points to 58.2 in October, led by new orders and sales.

A reading above 50 indicates the sector, which include retailing, hospitality, property and business services, and health, is expanding.

BNZ economist Craig Ebert said the pick-up was broad-based and a trend was emerging.

"We do have to do things like smooth through the last few months. It is still a wee bit bumpy but I think it's more the case now that the trend is looking much more positive, whereas if we went back say a year or so ago, we'd see the index pop up and it would look quite strong but then the next month it would (fall) back down again and the trend wouldn't be so good," Mr Ebert said.

"Now we seem to be in an environment where the index might look a bit wobbly for a month but then it snaps back to what's now becoming quite a strong trend."

The trend numbers were consistent with strong gross domestic product growth, if anything, above what was normal for the economy, he said.

Mr Ebert expected economic growth of 1% each for the September and December quarters, and annual growth of about 3% by mid-next year.