On a five month roll

The service sector continues to roll into higher levels of expansion, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for June was 54.7. This was up 1.7 points from May and the highest result since September 2010. 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.

BusinessNZ chief executive Phil O’Reilly said that the June result represented another step in getting the service sector back on track after a rocky three years.

“Looking at results from the start of 2011 shows a consistent lift every month in expansion. The June result in particular has been boosted by levels of expansion for activity/sales, new orders/business and stocks/inventories not seen for a while. Adding into the mix further earthquake related recovery work and the Webb Ellis trophy up for grabs in a few months’ time should mean additional boosts to activity.”

The BNZ - BusinessNZ Performance of Composite Index (PCI), which combines the results of both the PSI and PMI, shows that both options for measurement again improved in June (values of 54.8 and 55.4). The path of the PCI is again one of continued momentum, with expansion now near levels last seen in June 2010.

“The financial market’s saying of ‘the trend is your friend’ definitely applies to the New Zealand economy right now,” says BNZ senior economist, Craig Ebert. “Indeed, the tendency has been congenial for a good while now, with today’s PSI continuing the theme.”

Four of the five sub-indices were in expansion during June, with new orders/business (58.0) recording its highest result since June 2010, while activity/sales (57.7) produced its highest result since March 2010. Employment (51.6) recovered slightly after a dip in May, while stocks/inventories (53.9) recorded its highest result since November 2007. Although supplier deliveries (50.0) fell 0.4 points it represented no change for the current month.

Activity by region showed most areas again in expansion during June. The Canterbury/Westland region (59.2) led the way in terms of activity, but as mentioned in previous releases this is greatly influenced by a lack of supply of functioning service businesses in Christchurch. The Northern region (52.1) was unchanged from May, while the Central region (55.6) slipped 1 point. The Otago/Southland region (44.1) improved on its May result, although remains in contraction for the sixth consecutive month.