Sun shines on service sector

The service sector showed stronger expansion to start the year, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for January was 53.6. This was up 2.7 points from December, although still lower than the 56.5 recorded in November. A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining. The 2012 January result was also the third highest value recorded for that month.

BusinessNZ chief executive Phil O’Reilly said that given the subdued level of expansion in December, a pick-up in expansion that was led by new orders/business and employment at least starts the year off on a positive note.

“While new orders/business led the charge, the highest result for employment since 2007 bodes well for employment intentions. On a wider scale, growth in employment is also evident across other countries that run the PSI as the JPMorgan Global PSI shows employment rising at the fastest pace in over four years in January.

“Despite the pick-up in expansion, the proportion of negative comments from respondents (52.1%) remains higher than those with positive comments (47.9%), with the comments themselves having a strong seasonal influence due to Xmas and the weather.

BNZ economist Doug Steel remarked, “The PSI trends remain positive overall with even a hint of acceleration creeping in. This is most obvious in employment, with flow-on effects to retail trade. But there is still a mixed picture across industries and regions. We take January’s results as another small step along the road of recovery.”

The seasonally adjusted BNZ - BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for January showed the two options for measuring the PCI significantly improving from the previous two months. The GDP-Weighted Index (53.3) rose 2.3 points from December, while the Free-Weighted Index (52.2) rose 1.3 points. For the later, it was the highest value since August 2011.

Four of the five sub-indices showed expansion in January. This was again led by new orders/business (58.2), increasing 4.0 points from December. Employment (54.2) increased to its highest level since November 2007, and the third highest result since the survey began. Activity/sales (53.3) went back into expansion after a slight dip the previous month, while supplier deliveries (50.6) did likewise. Stocks/inventories (47.2) dropped 4.5 points to its lowest level since May 2011.

Unadjusted activity was in contraction for the North island, but expansionary in the South Island. Both the Northern (49.7) and Central (47.7) regions both posted a sub-50.0 result for the first time since June 2009. In contrast, both the Canterbury/Westland (64.5) and Otago/Southland (63.2) improved on their December results, mainly due to strong sales, orders and employment.

Link to the January PSI & PCI
Link to PSI time series data
Link to PCI time series data