A stand-out feature of the latest survey of activity in the services sector is that employment is starting to grow strongly.
The overall Bank of New Zealand-Business New Zealand Performance of Services Index fell to 56.3 points in November, down 1.4 points from October.
However, the October reading was the highest in six years and a reading above 50 indicates the sector is in expansion mode.
The services sector accounts for between two-thirds and three-quarters of total economic activity.
The employment sub-index stood at 54.4 points in November and rose in each of the last three months.
BNZ economist Doug Steel says the three-month average of 53.1 points has been higher on only two occasions in the six-and-a-half year history of the survey.
He says it's implicit that strong employment growth reduces the labour pool and other surveys have indicated firms are having increasing difficulty finding staff.
Mr Steel says that tends to lead to wage increases either to attract staff or to retain existing employees.
He says the unemployment rate is likely to drop below 6% fairly soon and historically that suggests that wage inflation will start increasing.
"That's all well and good if it's backed by productivity growth, if it's not then it's likely to spill over to wider generalised inflation and that's something that the Reserve Bank will need to be pretty mindful of."
The new orders sub-index at 60.8 points suggests growth will remain strong at least in the near term.
