NZ services growth accelerates in May, underpinned by tourism, foreign students

Monday 15th June 2015

New Zealand's services sector, which accounts for about two thirds of the economy, grew at a faster pace in May than a month earlier, helped by rising tourist numbers and international students.

The BNZ BusinessNZ performance of services index rose 1.5 points to a seasonally adjusted 58 last month, its highest level since July 2014, and extending a run of continuous expansion since October 2009. Four of the five sub-indices were above the 50 reading that separates contraction from expansion.

"We think the service sector will be a positive contributor to economic growth in Q1, with that data due out on Thursday," BNZ economist Doug Steel said in his report. "Activity appeared particularly strong in May, with the sales index rising to its highest level since 2007."

The PSI comes after its sister survey, the performance of manufacturing index, showed slowing industrial production activity for a third month, led by weakness in the forestry and oil and gas categories. The performance of composite index, which combines the two measures, increased 0.9 of a point to 56.9 on the GDP weighted basic, and edged up 0.1 of a point to 55.5 on a free-weighted basis.

Increased activity/sales and new orders/business drove expansion in the services sector last month, with readings of 63 and 63.1 respectively. Employment recorded a reading of 56.3 and stocks/inventories 50.3. Supplier deliveries was the only sub-index to register contraction, with a reading of 49.4.

BNZ's Steel said external trade including tourism and international students supported the services sector, and had also limited the expansion of the current account deficit.

"The services trade balance has been quietly expanding over the past two years and we suspect it will push back above a $2 billion surplus in this week's data, just as the annual goods balance slips back into deficit," he said.

Government data this week will show the country's first quarter balance of payments on Wednesday and gross domestic product on Thursday.

BusinessDesk.co.nz

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