NZ service sector bounces back in April

The inbound tourism sector is starting to show signs of recovery. Photo / Rotorua Daily Post

New Zealand's service sector bounced back last month after the February earthquake in Christchurch sapped confidence in March.

The BNZ-Business NZ Performance of Service Index rose 1.5 points to a seasonally adjusted 52.6 in April, the highest level of activity since September.

A reading of above 50 means the industry is growing, while a score below 50 indicates contraction. The Canterbury/Westland region, which slumped to 39.5 in March, reported a reading of 57.5 in April.

"Both the Canterbury/Westland and Otago/Southland regions improved from their severe level of contraction in March, with the former actually leading the way in terms of regional expansion for April," Business New Zealand chief executive Phil O'Reilly said in a statement.

The data comes as New Zealand struggles to pull out of its deepest recession in almost 20 years, with two earthquakes in Christchurch causing some $20 billion of damage and blowing out the government's fiscal deficit. Finance Minister Bill English will unveil his third budget this week in what will be an austerity budget with no new spending.

BNZ economist Craig Ebert said the country's recovery has reflected the path of the inbound tourism sector, and is beginning to show signs of life as New Zealand prepares for the Rugby World Cup later this year. Still, the long-term recovery of the sector is reliant on the global economy.

"The next test for in-bound tourism will be the winter (ski) season, followed by the Rugby World Cup in the Spring," Ebert said.

"The big test for the industry will be the path of the global economy over the coming years."

All five sub-indices within the PSI expanded last month, with new orders at 53.8, activity/sales at 52.9, employment at 53, stocks/inventories at 52.7 and supplier deliveries at 50.4.

By regions, Northern and Otago/Southland contracted at 49.3 and 46.3 respectively, while central expanded at 50.4.