Service sector expansion eases in December

The level of expansion eased for the last month of 2007, according to the Business NZ Performance of Services Index (PSI).

The PSI for December stood at 53.9, which was 8.7 points below the November result. A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining. The survey began in April 2007, with an average score of 58.1.

Business NZ chief executive Phil O’Reilly said that the dip in the rate of expansion for the PSI mirrored that of its sister survey the Performance of Manufacturing Index (PMI) for December.

“Comments received from businesses were heavily dominated by the Christmas/holiday period, which proves to be a double-edged sword for the service sector as a whole. Various service providers simply shut down over the period, while at the same time others find it their most profitable period” he said.

All five diffusion indices that make up the PSI continued to exhibit expansion, although all recorded lower values than November. New orders/business (59.2) again led the way, but experienced its first sub-60 result.

Activity by region was lower for all, although three of the four continued in expansionary mode. The Canterbury/Westland region (56.3) led the December values for the first time, while its regional neighbour, Otago/Southland (44.7), displayed its first decline.

Most service sectors continued to show expansion during December, although wholesale trade (47.5) fell back strongly from previous months. Transport & storage (65.4) led the way in December, followed by accommodation, cafes & restaurants (62.0) which built on its strong result the month before. The only other sector to show any decline was property & business services (49.3).

The downwards movement on the rate of expansion was also closely mirrored in the fall of positive comments received during the current month, which fell from 61.3% in November to 50.2% in December.