Services sector activity at best May level in six years

The index is "solid enough to infer sturdy growth across most of the economy".

New Zealand's services sector edged up in May to its highest level for the month in six years, reflecting widespread expansion and stoking optimism the economy may be picking up pace.

The BNZ-Business New Zealand Performance of Services Index was at 56.2 in May, the highest for the month since 2007. The level is little changed from 56.1 in April and follows readings of 55.7 in March and February. A reading above 50 indicates expansion in activity.

"This is the strongest sustained growth pulse we've seen from New Zealand's services sector since the economy began grinding its way out of recession back in 2009," Bank of New Zealand senior economist Craig Ebert says in a statement. The index is "solid enough to infer sturdy growth across most of the economy".

The latest report adds to a survey last week showing New Zealand manufacturing activity rose in May to the highest level since June 2004, led by improved growth in production, new orders and employment. The upbeat reports boost the chances of seeing better-than-expected growth as early as the second quarter, he says.

First-quarter gross domestic product figures scheduled for release on June 20 are expected to show the economy grew 0.6 percent in the first three months of the year, according to a Reuters survey. Services account for about 65 percent of the economy.

All five main services sector sub-indices were in expansion during May, according to today's report.

Services sector employment jumped to 53.6 in May from 51.3 in April, its highest level of expansion since April 2012. Combined with better prospects in manufacturing, that suggest further staffing expansion in official labour market data, Mr Ebert says.

New Zealand's jobless rate fell to a three-year low of 6.2 percent in the first three month of the year as the employment rate grew for the first time in four quarters, fuelled by demand for workers in Canterbury.

Employment growth from manufacturing and services "could yet prove significant in lowering the unemployment rate into the fives as soon as this year", he says.

Meanwhile, stock/inventories gained to 53.7 from 47.1 after two consecutive months in contraction and supplier deliveries rose to 56.1 from 53.3, its highest rate since June 2007.

New orders/business expansion slowed to 59.5 in May from 60.7 in April, while activity/sales weakened to 56.9 from 62.6.

Activity was positive in three of the four regions during May. The Northern region recorded its highest level since November 2012, up 3.2 points to 58.6. The central region fell back 5.2 points to 53.2. Canterbury/Westland remained in contraction at 47.3 while the Otago/Southland region lifted 1.1 points to 51.9.

(BusinessDesk)

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