Service sector activity improved slightly in August, according to the BNZ – BusinessNZ Performance of Services Index (PSI).
The PSI for August was 51.4. This was up 1.0 point from July, and the second highest August result since the survey began (although well off the peak of 58.4 in 2007). 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 2008 was 49.1, while for 2009 it was 48.8. So far, the average score for 2010 is 53.6.
BusinessNZ chief executive Phil O’Reilly said that while the small pick-up was positive, it still displays the patchiness of the New Zealand economy at present. It also remains to be seen how recent events will cause strain on any further improvement.
“August results for the Canterbury/Westland area were obviously collected for the period before the earthquake. However, results over the next few months may not be as favourable. While comments from manufacturers in that region indicate many have been relatively unscathed by events, many in the service sector may not be as fortunate.
BNZ senior economist Craig Ebert said that if New Zealand’s manufacturing sector is jogging on the spot, the services sector is doing doggy paddle.
“While August’s results are only a slight improvement on July’s, the sector is still keeping its head above water in a situation that could be worse, given last week’s stalling PMI and even weaker new orders. This sector’s new orders remain on the right side of 50, the employment index remained positive, and consumer confidence is holding up rather well – all reassuring stuff when fears of double-dips abound.”
Three of the five sub-indices were still in expansion mode in August. Both new orders/business and activity/sales experienced the same level of expansion during August (53.9), with the former unchanged from July, and the later increasing 3.6 points. Employment (51.8) nudged up slightly after a drop in July, while supplier deliveries (47.1) saw a slight dip compared with the previous month. Stocks/inventories (46.5) fell back to a level almost identical with August 2009.
Unadjusted activity was again mainly negative throughout the country. The Northern region (54.3) was again the only one to show expansion for August, up 3.4 points from July. The Central region (49.7) recovered after a sizeable decrease in July. In the South Island, both the Canterbury/Westland (46.4) and Otago/Southland (47.2) regions experienced similar levels of decline, although both showed some improvement from July.
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