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NZ services sector picks up in April

NZN 16/05/2016 Tina Morrison

New Zealand's services sector, which accounts for about two-thirds of the economy, picked up in April, suggesting the economy is growing at a "better than average" pace heading into the second quarter.

The BNZ-BusinessNZ performance of services index advanced 2.6 points to a seasonally adjusted 57.7 last month, the highest level of expansion since December 2015. A reading of 50 separates expansion from contraction.

The latest measure of the services sector was driven higher by activity/sales, and new orders/business. The PSI comes after its sister survey, the performance of manufacturing index, rose in April after two months of slowing growth. The performance of composite index, which combines the two measures, added 2.6 points to 57.6 on a GDP-weighted basis, and is up 2.1 points to 57.2 on a free-weighted basis.

"Having lost some of its heat in the early part of 2016, the performance of services index fought back to a very solid level in April," Bank of New Zealand senior economist Craig Ebert said in his report. "April's swift PSI and very solid PMI, overall, combine to suggest the economy is growing at a better than average pace as it steps into the June quarter."

All five PSI sub-indices were positive in April. Activity/sales increased to 63.2 from 59.9, new orders/business gained to 61.3 from 57.4, supplier deliveries advanced to 54.5 from 51.4, and employment edged up to 53.3 from 53.1. The only measure to decline was stocks/inventories which slipped to 52.5 from 52.6.

BNZ's Ebert said it was encouraging to see the PSI's employment index remain just over the 53 mark, where it has sat for three consecutive months. He noted employment is the only point of slack in the performance of manufacturing index, where the jobs index lags at 49.5.

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