Services activity falls again during April

Virginia Nicholls
Virginia Nicholls
New Zealand's services sector activity slipped further in April, touching the lowest level in more than six years and adding to concerns about an economic slowdown.

The BNZ-BusinessNZ performance of services index fell 0.5 of a point from March to a seasonally adjusted 51.8.

That was 3.9 points lower than a year earlier and the lowest reading since September 2012. The index remains below the long-term average of 54.4. A reading above 50 indicates expansion.

In Otago-Southland, overall activity in the services sector was 56.4 points, which was similar to the average from the past year of 55.2 points.

It was also pleasing to see that it had recovered after a drop in March, Otago Southland Employers Association chief executive chief executive Virginia Nicholls said.

The regional breakdown in categories put orders/new business and activity sales levels above 59, supplier deliveries at 54.5 and employment levels and stocks/inventories showing no change.

There was considerable concern with increasing cost pressures, including pay rates, employment relations changes and increasing compliance requirements, Ms Nicholls said.

BNZ senior economist Craig Ebert said services accounted for about two-thirds of the national economy and the index is "starting to struggle''.

BusinessNZ chief executive Kirk Hope said that the ongoing decline in expansion is a concern, exacerbated by a few factors during April, including extended holidays.

"The proportion of positive comments for April (43.9%) decreased significantly from March (55.8%). The decline was partly due to a number of comments centred on the Easter-Anzac break disrupting usual business activity.

Mr Ebert said unless there was a "sizeable bounce'' in May's result "we'll be left with the distinct impression of a slowing services sector''.

Overall, this is starting to "challenge the view that New Zealand's GDP growth will pick up through the course of 2019,'' he added.

"It could well encourage the RBNZ to respond with further monetary easing.''

In terms of the sub-index values for April, activity/sales fell 1.2 points to 51.1, while employment fell 2.1 points to 48.6 and stock/inventories eased 1.4 points to 48.3.

New orders and business inched up 0.2 of a point to 55.1 while the supplier deliveries measure rose 0.7 of a point to 51.6.

The performance of manufacturing index, released on Friday, showed April's manufacturing activity expanded versus March but was well down from a year earlier.

Combining the two surveys, the composite index fell 0.1 of a point from March to 51.6 on a GDP-weighted basis. It was at 55.7 in April last year. On a free-weighted basis, the measure fell 0.4 of a point to 51.3. It was at 56.6 a year ago. 

 

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