Services sector bounces back after storm-dented start to year

Services sector activity, which accounts for about two-thirds of the economy, expanded for the first time in four months. Picture / Richard Robinson

New Zealand's services sector activity, which accounts for about two-thirds of the economy, expanded for the first time in four months, in March, led by strong sales growth after a storm-dented start to the year.

The BNZ-BusinessNZ performance of services index rose to a seasonally adjusted 58.8 last month from 55.3 in February. The activity/sales sub-index jumped to 64.1, near the highest since the PSI survey started 11 years ago, from 54.3 in February.

The bounce back may have reflected the early timing of Easter this year and the impact of cyclone damage in February, said Doug Steel, senior economist at Bank of New Zealand.

"Whether it's Easter timing, weather influences, or something else, the volatility counsels caution in interpreting current data," he said. "It's definitely possible the March PSI result overstates the underlying trend."

The PSI comes after the manufacturing PMI survey for March, released last week, showed a drop off in activity by 1.1 points to 52.2.

"A stronger PSI is pleasing to see, especially in the context of the slowing we saw in last week's Performance of Manufacturing Index," Steel said. "Combined, these indicators suggest reasonable GDP growth has continued into 2018."

The seasonally adjusted composite index, which combines the PSI and the PMI, rose 2.5 points to 57.5 on a GDP-weighted basis and edged up 1 point to 55.5 on a free-weighted basis.

Services sector employment intentions remained relatively weak - at 50.5 in March from 50.6 in February, today's survey showed. New orders/business strengthened to 63.7 from 60.8 and stocks/inventories gained to 56.2 from 54.5. Supplier deliveries rose to 56 from 54.8 in February.