There was an increase to the BNZ-Business New Zealand Performance of Services Index in March, rising 2.7 points to 51.6, which indicates growth in the sector.

A reading under the 50-mark signals a contraction.

Last month the Performance of Services Index for New Zealand was driven upwards by a growth in sales, stocks and new orders, the latter increasing to a figure of 60.1 in March, from February’s 55.3.

According to BNZ senior economist Craig Ebert, this highlighted a core resilience in demand, following the initial shock of the spread of the Omicron variant, New Zealand Herald reports.

Nevertheless, there have also been indications that firms have been stymied by supply chain problems and skills shortages. Indeed, the sub-indices for employment and supplier deliveries remain under the 50-mark separating growth from contraction.

"Complaints about the supply-side factors certainly remained to the fore in feedback to March's PSI, with references to 'Covid/Omicron', 'red', 'staffing', and '(international) supply chains'," the BNZ senior economist stated.

"This explained why more than half of the comments in this month's PSI were marked as negative rather (than) positive, even though the overall PSI emerged as positive,” he went on to add.

Ebert continued that the sub-measures featured in last month’s report were still somewhat inconsistent, though he forecasts an improvement due to the easing of Covid restrictions this month.

New Zealand’s strongest performing businesses in March were those in the finance, retail and property sectors. In contrast, weakness remained within tourism and hospitality companies.

The economist added that it remains to be seen whether there would be a substantial recovery for the aforementioned sectors in the next few months, with borders now open to Australia and rules on gatherings having been eased.

Despite the weakness of the Performance of Services Index, New Zealand’s economy was on course to recover in Q2 following a flat-to-negative performance in Q1, Ebert went on to say.