Activity in New Zealand's services sector rose for the second month in a row in March, but was still contracting amid a deep-rooted recession, a survey showed on Monday. The Bank of New Zealand-Business NZ's performance of services index (PSI) rose 0.8 points to 47.1 last month, recovering further from the record low posted in January.
The index, which is not seasonally adjusted, has been below 50, the level indicating contraction, since April last year. It was 3.7 points lower than the same month a year ago.
The survey showed an improvement in two sub-indices, as well as a fall in the level of negative comments, but Bank of NZ senior markets economist Craig Ebert cautioned against reading too much into it. "The wider evidence is of widespread softening in the business sector, including services," he said in a statement. Last week, data showed seasonally adjusted retail sales rose 0.2 percent in February on the previous month.
Three of five sub-indices of the PSI rose from February, with new orders rising above 50, showing expansion for the first time in five months. Domestic consumption makes up around 60 percent of the New Zealand economy, which has been in recession since the beginning of last year. Many analysts believe the downturn will continue for much of 2009 given the tough global environment.
The Reserve Bank of New Zealand, which has slashed interest rates by a total of 525 basis points since last July, is expected to cut by 50 basis points at its April 30 rate review. The survey, which started in April 2007, is based on responses from more than 300 service sector companies and mirrors a long-established poll for manufacturing also conducted by Business NZ.