The services sector has continued to expand above its long-term average, led by new orders and activity.

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The BNZ – BusinessNZ Performance of Services Index (PSI) was 56.1 points, which was down 5.1 points from its highest ever result in April but above its long term average of 53.9.

A PSI reading above 50.0 indicates the service sector was generally expanding.

New orders/business were at 62.1 points and activity/sales at 58.7 points, while supplier deliveries contracted at 45.1 points.

BNZ Senior Economist Doug Steel said the current strength in the PSI and Performance of Manufacturing Index, which was 58.6 points last month, pointed to economic growth over coming quarters.

However, he said there were significant challenges including the general lack of international tourism and foreign students continued to cause “acute pain in parts”.

He said supply side issues were also pervasive and persistent.

“The obvious supply side stresses suggests significant upward pressure is building on inflation,” Steel said.