Service sector remains in positive light

BusinessNZ

Monday 19th September 2011

Continuing healthy levels of new business/orders and activity/sales kept the service sector in expansion for August, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for August was 53.9. This was down 0.6 points from 54.5 in July, but the highest August result since 2007. A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining. The average PSI value for 2009 was 48.8, while for 2010 it was 53.2. So far for 2011, it is 52.8.

BusinessNZ Chief Executive Phil O’Reilly said that the August result was helped by ongoing solid results for new business and sales.

“Although employment and stocks showed contraction in August, new business and activity pulled through again with levels of expansion similar to both June and July. Also, it is pleasing to see that recent influences on business activity are constructive, with the proportion of positive comments left by respondents in August (58.8%) increasing significantly from July (50.0%),” he said.

“Looking ahead, time will tell whether the recent kick-off of the World Cup will help boost the service sector results further, particularly within the hospitality and tourism areas.”

BNZ Economist Craig Ebert says these are consistent with a range of other business surveys that have proved remarkably robust.

“It’s not just the latest PSI and PMI readings that give us encouragement through what has been another very difficult year – initially with the earthquakes and then globally,” Ebert said.

The BNZ - BusinessNZ Performance of Composite Index (PCI), which combines the results of both the PSI and PMI, shows that both options for measurement lost further expansionary steam in August (53.7), which was also the first time both options produced the same value.

“It’s not just the latest PSI and PMI readings that give us encouragement through what has been another very difficult year – initially with the earthquakes and then globally,” Ebert said.

Three of the five sub-indices were in expansion during August, with new orders/business (58.7) producing its third consecutive value above 58. Activity/sales (57.0) also produced its third consecutive value above 57, while supplier deliveries (53.2) recorded its highest value since February 2008. Employment (49.2) improved from July but remained in contraction, while stocks/inventories (49.5) fell back into contraction after two months in expansion.

Activity was expansionary for three of the four main regions. This was led by the Northern region (57.4) which increased 3.9 points from July to record its highest result since September 2010. The Canterbury/Westland region (56.5) returned to expansion for August, while the Central region (55.9) continued to exhibit a stable period of activity that has now continued for four months. At the other end of the scale, the Otago/Southland region (36.9) collapsed from the July result to record its lowest level of activity since June 2008.

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