Service sector climbs further into expansion

Service sector activity climbed further into expansion during September, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for September was 54.8. This was up 2.9 points from August, and the second highest September result since the survey began (peaking at 57.1 in 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 2008 was 49.1, while for 2009 it was 48.8. So far, the average score for 2010 is 53.8.

BusinessNZ chief executive Phil O’Reilly said that the September result was encouraging for a number of reasons, including broad expansion across most of the main indexes, as well as throughout the country and size of firms.

“In particular, the fact that the Canterbury/Westland region exhibited a positive result for the first time since March 2010 was heartening to see given recent events. While there were a number of respondents who outlined negative effects of the earthquake, there were some businesses who managed to adapt as it opened doors to new business opportunities. Also, other positive effects helped negate the damaging effects of the quake.”

BNZ economist Doug Steel said the bounce in September’s PSI was positive given the string of generally weak and disappointing economic indicators for the second and third quarters of the year.

“Only time will tell if it is the forerunner of a more general economic improvement into year’s end, but for now, at least, it has broken the run of negative data.”

Four of the five sub-indices were in expansion mode in September. Both new orders/business (57.0) and activity/sales (57.4) continued to show similar levels of activity, increasing 2.7 and 3 points respectively. Employment (53.5) nudged up again to record its highest value for a September month, while stocks/inventories (49.8) came close to the level of no change. Supplier deliveries (53.0) increased 5 points from August, and reached its highest level of activity since November 2007.

For the first time since March 2010 unadjusted activity was positive throughout all of the country. The Northern region (58.5) again led the way with its highest result since November 2007. The Central region (54.5) recovered after two consecutive months in decline. The South Island also saw a return to expansion, with the Canterbury/Westland region (51.6) and Otago/Southland (55.8) regions climbing out of five months of contraction.