Holding pattern – PSI
The PSI for August was 53.2 . This was down 5.0 points from July, and the lowest level of activity since January this year (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Compared to previous August results, the 2013 value was up on 2012, but lower than 2011. So far in 2013 the PSI has averaged 54.5.
BusinessNZ chief executive Phil O’Reilly said an August figure that trumped July’s result would have been remarkable given the previous month’s result was the highest since 2007. However, the August value continues the story evident during 2013 of solid growth.
“The lower level of expansion during August meant the proportion of positive comments dropped from 62% in July to 54% for the current month. Of those who provided positive comments, many outlined the general positive business environment at present, along with a more buoyant attitude. For those who provided negative comments, many cited competitive pressures.
BNZ Economist Doug Steel said the overall positive trends in the service sector imitate those in the manufacturing, building and agriculture sectors. It all bodes well for stronger economic growth ahead, after what appears to have been a soft Q2. The positive overall economic picture makes it difficult to get too downbeat on some of the softer detail in August’s PSI survey. Still, they are worth monitoring.
Despite the dip in the level of expansion, none of the five main sub-indices were in decline during August, which has now been the case for the last four months. New orders/business (55.2) and activity/sales (55.2) were tied for the highest level of activity for August, while stocks/inventories (53.6) and supplier deliveries (53.4) also produced similar levels of activity. Employment (50.0) gave up its gain from July to return to a position of no change as in June.
There was a clear difference in activity levels between the North and South Islands. In the North Island, the Northern region (55.5) led the way, despite falling 7.1 points from July. The Central region (53.5) improved 3.0 points, with its highest value since April 2013. In the South Island, the Canterbury/Westland region (42.1) fell back further from July, while the Otago/Southland region (36.5) experienced a significant drop for August, due to low activity and new business.
The seasonally adjusted BNZ – BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for August saw both options for measuring the PCI return to more familiar levels of expansion after a stellar result for July. The GDP-Weighted Index (54.0) decreased 4.4 points from July, while the Free-Weighted Index (55.6) fell 3.6 points over the same period. The fact that both the manufacturing and services sectors experiencing a lower level of expansion during August meant both measures also fell accordingly.
For media comment: Phil O’Reilly 04 496 6552 or Doug Steel 04 474 6923