Services sector activity eased in Feb as new orders fell at a record rate

Doug Steel, Bank of New Zealand economist

New Zealand services sector activity, which accounts for about two thirds of the economy, eased to a six month low in February, as new orders fell at the fastest rate since the survey began in 2007.

The BNZ-BusinessNZ Performance of Services Index slipped to a seasonally adjusted 53.1 in February from 57.8 in January and 55.7 a year earlier. A reading above 50 indicates expansion. The measure of new orders slowed to 56.1 from 66.8 in January, which was a six-and-a-half year high.

"The service sector has been fair humming along," Bank of New Zealand economist Doug Steel said in a note. "Growth slowed in February, as can be understood following such a frantic pace in January. Looking through the monthly wiggles, growth trends in the service sector appear strong in early 2014."

The seasonally adjusted BNZ-BusinessNZ Performance of Composite Index, which combines the services and manufacturing indices and representing sectors which account for more than three quarters of the economy, suggests New Zealand's economy expanded at an annual growth rate of about 3 percent in the fourth quarter, accelerating to about 3.5 percent in the first quarter of this year, BNZ said.

New Zealand's fourth quarter GDP report is scheduled for release on Thursday, with economists polled by Reuters expecting the economy expanded at a 3 percent annual rate.

In the latest services index, Canterbury/Westland underperformed, suggesting the region may be hitting capacity constraints as its unemployment rate hit a five-year low of 3.4 percent in the fourth quarter, which could signal rising inflation pressures, the BNZ's Steel said.

Canterbury/Westland was the only region in contraction with an index of 43.4.

(BusinessDesk)

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