NEW ZEALAND: Tourism Boosts Services Sector In South

Tourist demand and record visitor numbers to southern New Zealand have proved to be the principal driver of Otago-Southland's service industry.

Otago-Southland Employers Association chief executive John Scandrett said yesterday that along with rising visitor numbers, construction and health services activities were also ‘‘very much'' at the expansionary end of the range.

The BNZ-BusinessNZ Performance of Services Index showed New Zealand's services sector experienced slower levels of expansion in March.

Otago-Southland recorded a reading of 63.4 points, well ahead of readings in the other regions. Canterbury-Westland recorded 55.8 points, central 54.2 and northern 57.5. The New Zealand seasonally-adjusted PSI was 54.8, down 1.9 from February.

The southern region recorded a sub-index reading in activity and sales of 86.4 points in February, which Mr Scandrett at the time described as a survey spike

unlikely to be seen again in the foreseeable future.

‘‘We were wrong. The March survey has presented a similar activity level and a clear majority of survey sentiment confirms the latest performances seen are not a flash-in-the-pan.''

The March activity and sales recording for Otago-Southland was 82.1. Nationally, activity and sales was recorded at 59.6, he said.

BusinessNZ chief executive Kirk Hope said easing expansion levels should not undermine the fact the sector was still in positive and solid territory.

‘‘While overall activity was not as high, compared with recent months that came close to the 60-point mark, the sub-indices underpinning the main result are all still positive, along with expansion across the country.''

BNZ senior economist Craig Ebert said when the data was smoothed, it became clear the momentum in the PSI had slowed since a high point late last year.

However, it was far from being slow, as March was still above the historical average of 53.9. Even taking the March result alone of 54.9, a 16-month low, it was still above the historical average.

The weakest spot was in inventories (52.3). That did not seem preparation for weak demand given the new orders component of the PSI was a ‘‘solid'' 57 in March, he said.

The PSI's employment index, which largely repeated its February result, was 53.

‘‘This is particularly encouraging considering the jobs index of the PMI has turned slightly negative over recent months.''

The latest Quarterly Survey of Business Opinion had also suggested something of a slow-down in New Zealand's services sector, although not so much in terms of the last few months, Mr Ebert said.

Service respondents to the New Zealand Institute of Economic Research's QSBO held a robust view about staffing. Their view on investment was also reasonably positive, while their profit expectations improved to be the loftiest in at least 20 years.

The Real Estate Institute's results for March were robust, more so than the QVNZ data, he said.

Sales jumped a seasonally adjusted 5% despite an early Easter. The ‘‘stratified'' price index increased to an annual pace of 13.3% from 11.9% in February. Importantly, Auckland was back in the thick of the inflation, with 13.3% annual inflation in March after being 11.1% in February.

Even Wellington, where population pressures were not as strong as elsewhere, was experiencing a spike in prices, with annual inflation surging there to 12.8%.

‘‘This is further confirmation to us interest rates are playing a stronger and stronger role in the housing market now.''

Household credit expanded in February, as it did in January and December, Mr Ebert said. Annual growth was pushed up slightly to 7.6% from 7.5%.

While it did not sound a lot, it happened despite ongoing loan-to-value restrictions, 7.6% was well beyond the rate the Reserve Bank officials previously indicated would raise their concern and the dollar increase in household credit in the past 12 months was $16.2 billion, comparable to the boom times of 2003-07.

‘‘In all of this, there are signs re-leveraging is well under way in New Zealand's household sector.''