Monday 14th May 2018
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New Zealand's services sector activity, which accounts for about two-thirds of the economy, dropped back in April but remained above the long-run average.
The BNZ-BusinessNZ performance of services index fell to a seasonally adjusted 55.9 last month from 58.6 in March, and ahead of the long-term average of 54.5.
"Outside of March’s spike, the PSI has been averaging just above normal post the announcement of the new government," said BNZ senior economist Craig Ebert. "This is after having been very much on the strong side earlier on in 2017. So, momentum in the services sector has petered but is decent nonetheless. This is underpinned by near-trend readings across all of the main sub-indices, and with new orders/business with its nose in front of the pack."
Four of the five sub-indices fell in the month, with activity/sales dropping 7.9 points to 56.6, and supplier deliveries down 3.9 points to 51.8. Stocks/inventories dropped 3.5 points to 51.9 and new orders/business fell 2.7 points to 60.8. Employment rose 0.8 of a point to 51.4.
Ebert said that further gains can be expected for labour market data, after the March quarter showed ongoing strong expansion and a nine-year low in unemployment, based on results from the PSI and its sister survey, the Performance of Manufacturing Index.
"Together, these are back above trend. Still, wage inflation is yet to become obvious in the official statistics. The March quarter data on it were surprisingly slow," Ebert said.
The PSI comes after the manufacturing PMI survey for April, released last week, which showed manufacturing activity accelerated in April, bouncing back from a lull in the first three months of the year. A pick up in building intentions stoked production among building materials companies.
The seasonally adjusted composite index, which combines the PSI and the PMI, fell 1.5 points to 55.9 on a GDP-weighted basis and rose 1 point to 56.8 on a free-weighted basis.
Ebert said retail was a lagging industry within the services sector, and the weakest of the industries in April with an unadjusted reading of 43.6, and a three-month reading of 52 compared to 57.2 for the overall PSI.
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