Service sector expansion within tight band

17 October 2011

Service sector expansion within tight band

The service sector remains within a very tight band of expansion that has now continued for three months, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for September was 53.2. This was down 0.6 points from 53.8 in August, and 0.4 points down from 53.6 in July. 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 CEO Phil O'Reilly said the survey gave positive and negative insights.

"After going through a long period of little change, the last few months' consistent and solid if not spectacular expansion is good to see. However, while Rugby World Cup games throughout the country over September have brought some businesses additional sales, others have lost out through consumers diverting spending from normal activities."

The BNZ - BusinessNZ Performance of Composite Index (PCI), which combines the results of both the PSI and PMI, shows both lost steam in September (52.4 and 51.6), with a weakening manufacturing activity the main underlying cause.

BNZ economist Doug Steel noted the considerable variation in the PSI details in September.

"The Rugby World Cup, the change in school holiday timing, Christchurch earthquakes and world growth fears are just some of the influences on the services sector over recent times. The combination of factors has led to some unusual results in the details, like a softening in sales growth, yet robust new orders and a lift in employment."

Four of the five sub-indices were in expansion during September, with new orders/business (56.2) again leading the way although slightly down on expansion from August. Activity/sales (51.2) dipped significantly in expansion, while supplier deliveries (52.1) decreased one point from August. Stocks/inventories (49.8) improved from August, although still under the no change mark of 50.0, while employment (53.5) had its highest result since April 2010.

Activity was again expansionary for three of the four regions. This was led by Canterbury/Westland (57.2) which increased 0.7 points from August. The Central region (57.0) was close behind, with its highest result since March 2011. The Northern region (55.8) dipped in expansion during September, while the Otago/Southland region (34.4) had worsening results with its lowest level of activity since the PSI began in April 2007.

Link to BNZ-BusinessNZ PSI for Sept 2011 http://www.businessnz.org.nz/file/2171/September%202011%20PSI%20Releasepdf

Link to PSI time series data http://www.businessnz.org.nz/file/2169/Copy%20of%20PSI%20Seasonally%20%20Unadjusted%20Time%20Series.xls

Link to PCI time series data http://www.businessnz.org.nz/file/2170/Copy%20of%20Combined%20PMI%20PSI%20Time%20Series.xls

ENDS

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