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NZ services sector activity picks up in May but still tepid

Monday 17th June 2019

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Activity in New Zealand's services sector lifted in May following a three-month lull but remains below the long-term average. 

The BNZ-BusinessNZ performance of services index increased 1.6 points in May from April to a seasonally adjusted 53.6. That was 3 points lower than a year earlier and remains below the long-term average of 54.4. A reading above 50 indicates expansion.

"Overall, however, May’s PSI does tend to affirm the impression of a slowing services sector, rather than instilling confidence that another pick-up is afoot," said Bank of New Zealand senior economist Craig Ebert.

While there was a bounce in the May result "it was hardly sizeable," he said.

Ebert also noted the result was aided by a spike in the inventory index relative to the new orders/business sub-index. 

The stock/inventories sub-index lifted 8.3 points to 56.8 while new orders and business inched up 0.6 of a point to 55.7.

Activity/sales lifted 3.3 points to 54.7, while employment rose 2.2 points to 50.6 and the supplier deliveries measure was unchanged at 51.7. 

The PSI's sister survey, the performance of manufacturing index, was released on Friday, and showed activity grew at its slowest pace in more than six years last month. The BNZ-BusinessNZ PMI fell 2.5 points to a seasonally adjusted 50.2 in May.

Like the PMI, the results of the PSI "paint a picture of a slowing economy, which might struggle to live up to most forecasters' GDP growth forecasts," said Ebert. 

Economists are expecting GDP to have expanded 0.6 percent on quarter in the first three months of the year and several see it gaining strength in the second half of the year. 

Combining the two surveys, the composite index rose 1.3 points from April to 53.1 on a GDP-weighted basis. It was at 56 in May last year. On a free-weighted basis, the measure rose 0.4 of a point to 51.8. It was at 55.7 a year ago.


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