Easing of expansion continues in service sector

Expansion levels for the service sector dipped for the second consecutive month, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for July was 53.1.  This was down 0.8 points from June, although not as strong as the 2.5 point fall for the previous month (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining).  Compared to previous June results, the 2012 value was almost identical to 2011, but up on 2010.

BusinessNZ chief executive Phil O’Reilly said that the chipping away of expansion in the service sector is also evident in the comments received from respondents.

“Compared with June where comments were more positive than negative, July has seen this even up considerably.  Either a slowness or lack of sales/orders is top of mind for many finding business conditions difficult at present.  For those finding activity positive, a much broader range of comments is evident, although there is little in the way of common themes to indicate improved activity in the months ahead.                

BNZ economist Doug Steel said that the lack of common themes in either PSI respondent comments or in the PSI data was in keeping with other economic data of late.

“It has been all over the show. For every indicator pointing one way there seems to be another one pointing in another direction. At least, on average, the indicators point to moderate growth ahead.”

The seasonally adjusted BNZ - BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for July showed the two options for measuring the PCI again both down from June, as an easing in both the manufacturing and service sector results reduced combined activity.  The GDP-Weighted Index (52.7) decreased another 0.6 points from June, although not as strong as the 2.9 point fall in June when the service sector took a greater hit in terms of activity.  The Free-Weighted Index (51.3) also decreased 0.6 points, resembling levels of activity during November/December last year.

Despite another dip in expansion levels, all five sub-indices remained in expansion during July.  New orders/business (58.8) continued to lead for the 22nd consecutive month, and recovered some lost ground from the June result.  Activity/sales (52.3) slipped a further 1.9 points from June after slipping 3.6 points from May.  Employment (52.5) and stocks/inventories (51.5) recorded an almost identical result to June, while supplier deliveries (50.3) moved closer to the no change mark.

Unadjusted activity was again expansionary for three of the four regions.  In the North Island, the Northern region (50.7) experienced its lowest level of activity since the start of 2012, while the Central region (55.5) improved slightly on its June result.  In the South Island, the Canterbury/Westland region (53.4) continued to see-saw within the 50-60 point mark, while the Otago/Southland region (48.3) improved from June, but experienced its third consecutive month in decline.

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