NZ services industry recovers for 2nd month, remains weak

Monday 20th April 2009

New Zealand's services industry picked up for a second month in March, while remaining in contraction amid a broad business downturn and with little to provide stimulus. The Bank of New Zealand – Business NZ Performance of Services Index (PSI) rose to 47.1 last month from 46.3 in February. March marked the 12 straight month of contraction.

Three of five diffusion indexes remained in contraction last month, with employment easing to 44.8 from 44.9 and stocks/inventories sagging to 45.4 from 48.3.

Activity/sales improved to 47.8 from 42.9 and new orders turned positive at 51.4 from 49.8. Deliveries also turned positive at 51.4 from 49.8.

The PSI has picked up from a record low 42.7 in January though Bank of New Zealand senior economist Craig Ebert said the lack of a reliable seasonally adjusted measure meant the improvement must be treated with skepticism. A rebound in services doesn’t tally with the Quarterly Survey of Business Opinion, which showed the services sector weakened through the early stages of 2009, he said.

“With evidence of widespread softening in the business sector, including services, there is increasing onus of the consumer and public sectors to drive the nation out of recession,” Ebert said.

He expects little impetus from consumers as job losses mount and the government doesn’t have room for more stimulus measures after two rounds for tax cuts.

“We might yet be surprised by how austere the May 28 Budget will (need to) be, and its depressing consequences for the economy at large,” he said.

Reserve Bank Governor Alan Bollard is expected to cut the official cash rate by 50 basis points to a record low 2.5% on April 30. The prospects for a cut of that size was bolstered by inflation figures last week showing the consumer price index eased back to 3%, within the central bank’s 1% to 3% target range.

Businesswire.co.nz

Comments from our readers

No comments yet