Solid service sector activity continues

The service sector continued to show healthy signs of expansion in 2012, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for March was 53.9.  While this was down 1.9 points from February, it was still up on the January result, along with an overall solid average result of 54.4 for the first quarter of 2012.  A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining.  The 2012 March result was also the second highest value recorded for that month since the survey began in 2007.

BusinessNZ chief executive Phil O’Reilly said that exceeding the February result would have been ideal, but the fact that expansion did not slip dramatically provides some encouraging signs for the sector. 

“While the PSI has been in expansion for 20 consecutive months, the results have largely been flat with one good month followed by another struggling to cling on to positive territory.  The results for the first three months provide more optimism for sustained growth than we have seen over the last couple of years.      

“Looking beyond the main PSI result, the proportion of positive comments has continued upwards, going from under half in January, to 56.1% for February and now 58.6% in March.  In contrast, the sharp fall in the sub-index of activity/sales held back the potential for stronger overall growth, although continued robust values for new orders should assist sales in the months ahead.” 

BNZ senior economist Craig Ebert said “March’s PSI result builds on February’s uplift, which along with the services elements of the NBNZ and QSBO business surveys reinforces the notion that the services sector is in a solid growth pulse.”

The seasonally adjusted BNZ - BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for March showed the two options for measuring the PCI still producing healthy signs of activity.  The GDP-Weighted Index (54.5) decreased 1.5 points from February, while the Free-Weighted Index (55.3) fell 2.3 points.  However, the March result for the former was the third highest since June 2010 and for the later the second highest since April 2010.

Four of the five sub-indices showed expansion in March.  This was again led by new orders/business (60.0), which was largely unchanged from the previous month.  Activity/sales (51.6) dropped 6.3 points to end up at its lowest point since December 2011.  Employment (52.4) remained stable compared with the previous month, while stocks/inventories (51.6) dipped slightly but remained in expansion.  Supplier deliveries (48.3) fell back into contraction after two months in expansion.

Unadjusted activity was expansionary in three of the four regions.  Both the Central (60.0) and Canterbury/Westland (65.6) regions built on their activity levels in February, while the Northern region (51.5) lost some of its gains from the previous month.  The Otago/Southland region (49.3) slipped back into slight contraction after four consecutive months in expansion.  This was exclusively due to very weak activity/sales levels for the month.