New orders and sales activity rebounded, although they remained below their long-term average. Photo: 123RF
The services sector perked up last month as demand and sales bounced back.
The BNZ-Business New Zealand Performance of Services Index (PSI) for May was 53.3, up 3.2 from April's revised reading, when it was largely flat.
A reading above 50 indicated expansion.
New orders and sales activity rebounded, although they remained below their long-term average, while employment also picked up.
BNZ senior economist Craig Ebert said while the overall services index was near normal, results varied between regions and sectors, with retail trade among those that contracted.
Accommodation cafes and restaurants also contracted, while health and community, and finance and insurance sectors expanded.
Ebert said the rebounding PSI signalled potential economic growth in the second quarter, after the economy contracted for two consecutive quarters.
"The lift in the PSI's activity/sales index, especially, offers a lifeline to the idea [that second quarter gross domestic product] will post a modicum of expansion - as is currently our view - when there were risks it wouldn't," he said.
"Still, this doesn't deny the economy is on a broadly slowing trajectory, which is what's required to take the inflationary heat out of it," Ebert said.
Business NZ chief executive Kirk Hope said the lift in expansion was welcome news after the slower April.
"The lift in expansion for May also saw a pick up in the proportion of positive comments, which rose from 39.8 percent in April to 50.6 percent for the current month," he said.
"Overall, positive comments received did not show any defining themes. Instead, comments were either industry specific or very general around increased activity."