Good demand for accommodation is helping to drive activity in the services sector. File pic Photo: 123RF
Activity in the services sector lifted further last month, driven by sales in the accommodation, hospitality and community sectors.
The BNZ-Business New Zealand Performance of Services Index (PSI) increased 1.1 points last month to 55.8.
That was a few notches above the long-term average of 53.6 with a reading above 50 indicating the sector expanded.
The key indicator of activity and sales lifted to 53.6, the highest since November last year, as did new orders and business, which lifted 2.3 points from January to 77.1.
BNZ senior economist Craig Ebert said it was an encouraging result and showed the services sector was expanding at a rate above the normal pace.
He said the PSI, combined with the recovered tone of the manufacturing sector, as seen in the recent PMI survey, suggested economic activity was growing relatively well in the early stages of this year.
"I think where these numbers are important is probably in the context of the GDP [gross domestic product] figures we're about to see later in the week," he said.
"Most expectations, including our own, are that it will report a slight fall in activity and of course, if you get two quarterly falls in a row around GDP, often it's interpreted as the start of a recession or being in recession.
"So we're not convinced that those Q4 numbers are going to imply that, and that's where these figures coming through today are quite important too in general, they're positive."
"They're telling us that the economy is still expanding."
Ebert said the effects of Cyclone Gabrielle and the severe flooding in Auckland and the upper North Island in February would impact manufacturing and services activity in this quarter.
"But underneath that there does seem to be a pulse of activity coming through," he said.
"If anything, it's strengthening. If you look particularly at the PMI [Performance of Manufacturing Index] that we saw last week, that index was actually running negatively late last year and it seemed that the economy was slowing down, perhaps even taking a pause, even a negative move late last year.
"But if you look at these indicators this year, and I think the PSI is a very good example, that's telling us that things are expanding above the normal rate, which is encouraging for GDP growth."
BusinessNZ chief executive Kirk Hope said the February result built on January's momentum.
"The further lift in expansion levels in the services sector also saw a sizeable drop in the proportion of negative comment, which stood at 51.9 percent in February, compared with 61.7 percent in January, 58.2 percent in December and 47.3 percent in November.
"Reasons were varied across those who outlined positive comments.
"The return of customers after the holiday season was one, along with a general pick-up in tourism, including overseas visitors".
The PSI showed employment levels dropped slightly from January's figures to 51.2, while the transport and storage sector was weak, posting 37.5, sub-50 for the last 12 months.
Retail trade meanwhile, was "moribund" in February, at 37.5.
It comes after electronic card transactions data from Stats NZ last week showed retail spending remained flat, as storm disruptions affected consumers' shopping habits.