Otago-Southland fell slightly in March but recorded a positive index reading of 52.5.
A reading above 50 indicates expansion and below 50, contraction.
The Otago-Southland index reading was 59 in January and 55.7 in February.
The New Zealand index was 57.3.
The central district, which includes Wellington, had the highest regional reading: 64.9.
All five sub-indices were in expansion mode and results for the various service sectors were almost all in expansion mode.
As well as property and business services, wholesale trade (59.1), accommodation, cafes and restaurants (54.2), retail trade (52.3) and transport and storage (55.7) all improved and expanded.
All firms by employment size again showed expansion during March, with most experiencing stronger activity levels compared with February.
The improvement in the level of expansion during March meant the proportion of positive comments from respondents increased to 62.9%, compared with 57% in February, 51.5% in January, 56% in December and 54.5% in November.
BNZ senior economist Craig Ebert said the sector picking up the pace of expansion was not a great surprise.
It was what most analysts had been inferring when forecasting the economic recovery to gather strength this year.
"But it's certainly good to see some clear signs of it coming through, when there is not overwhelming evidence of it in the hard data."
