Small service sector expansion in November

Monday 20th December 2010

The services sector continued to expand in November, by a small amount, the latest BNZ-BusinessNZ performance of services (PSI) indicates.

The PSI index for November was a seasonally adjusted 51.4, up just 0.2 points from October and the second lowest November result since the survey started. A PSI reading above 50 indicates services activity is expanding.

BusinessNZ chief executive Phil O'Reilly said that while the first half of 2010 had shown a healthy level of expansion, the second half has been less encouraging, with activity clinging on to expansion.

"Since July onwards, results have generally underlined the cautious approach consumers are taking at present with their spending habits," Mr O'Reilly said.

"In terms of actual comments received from respondents, positive comments have highlighted certain businesses enjoying seasonal effects at this time of year, while good weather conditions have generally provided a boost to sales.

"At the other end, a general lack of orders, demand and work have caused ongoing concerns for others, as many head into their traditionally busiest time of the year."

BNZ economist Doug Steel said detail of the PSI provided some support to the idea that economic growth would pick up into 2011.

A 54.4 reading for the new orders sub-index promised a rise in activity ahead, Steel said.

Some confidence could also be taken from the transport PSI index, where the three-month average had lifted to 61.6, its highest level since the series started in mid-2007.

"Transport activity can give a good guide to the general economic pulse, given its role in many economic transactions," Steel said.

"This is not to give the impression that it is all go in the service sector. It is not. The retail, hospitality, and recreational and personal service industries are still struggling with a cautious domestic consumer."

Another interesting breakdown in the November PSI was the geographic split - with the north of the country seemingly doing considerably better than the south, Steel said.

The northern and central PSI readings came in at 55.9 and 55.3 respectively, a far cry from the 44.6 and 44.7 recorded in Canterbury/Westland and Otago/Southland respectively.

The general weakness in the south seemed to be connected to retail sales figures.

NZPA

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