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Services sector slows to near 5-year low

NZN 15/05/2017 Paul McBeth

New Zealand's services sector, which accounts for about two-thirds of the economy, shuffled along at its slowest pace in almost five years as a combination of school holidays and unseasonably wet weather were seen as weighing on activity.

The BusinessNZ-Bank of New Zealand performance of services index dropped 6 points to 52.8 in April, its lowest level since December 2012 and a slide from what was the second-highest reading in the prior 18 months.

A reading of 50 separates expansion from contraction, and New Zealand's services sector has been in expansion since July 2010.

Two of the five sub-indices shrank in April, with stocks/inventories down 10.3 points to 46.7 and supplier deliveries falling 7 points to 48.5.

Activity/sales dropped 8.6 points to 52.3 and new orders/business fell 10.2 points to 55.6, while employment increased 2.8 points to 55.8.

"The timing of school and public holidays looks to be the main culprit disrupting activity, although some appalling weather through the month didn't help spending either," BNZ senior economist Doug Steel said in a note.

"If there is a slowing in underlying economic momentum underway, the drop in the PSI surely overstates it."

The PSI follows its sister survey, the performance of manufacturing index, on Friday which showed a dip in manufacturing activity last month.

The performance composite index, which combines the two, fell 5.2 points to 53.4 on a GDP-weighted basis and 2.9 points to 55.1 on a free-weighted basis mainly due to the slump in the services component.

Across the regions, Northern services activity dropped 8.2 points to 51.5, while Central was down 9.1 points to 51.5. Canterbury/Westland posted a reading of 54.4, down from 58.8 in March, while Otago/Southland was the only region to register shrinking activity with a reading of 49.4 compared to 59.1 a month earlier.

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