The service sector recovered from a previous lacklustre result to record its highest level of expansion for 20 months, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for November was 56.6. This was up 5.6 points from 51.0 in October, and 3.7 points up from 52.9 in September. 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 2009 was 48.8, while for 2010 it was 53.2. So far for 2011, it is 52.9.

BusinessNZ chief executive Phil O’Reilly said that after the poor November manufacturing result through the PMI, it was pleasing to see the service sector showing some healthy expansion towards the end of 2011.

“The proportion of comments from respondents were far more positive in November (65.5%) than October (48.9%), with a post RWC return to business and seasonal effects such as weather and Xmas causing customers to dig into their pockets.

“The other pleasing aspect of the November result was that expansion was across the board, including all regions where previously the Otago/Southland area had been struggling. New orders and activity/sales were particularly healthy, which could bode well for the December/January period ahead.”

The BNZ – BusinessNZ Performance of Composite Index (PCI), which combines the results of both the PSI and PMI, shows another contrast in the two options for measuring the PCI, with the two measurements showing the largest gap in activity since the PCI began (54.2 vs 50.6). This was mainly due to the strong improvement in the PSI, but continued weakness in the PMI.

Bank of New Zealand Economist Doug Steel said the PSI rise in November was stunning.

“While New Zealand’s economic data has been volatile through 2011 and we should not over interpret the strength of one month, it would be equally wrong to discount it altogether. Especially because the strength was throughout the PSI survey and it fits with improvement in a few other service sector indicators.”

The recovery in expansion meant all five sub-indices showed expansion in November. This was led by new orders/business (60.2) followed by activity/sales (58.5). Both of these indices recorded their highest values since March 2010. Employment (53.0) and supplier deliveries (52.9) experienced almost identical levels of expansion, while stocks/inventories (50.5) improved marginally on its October value.

Activity was expansionary for all four main regions for the first time since December 2010. Like the PMI, the Otago/Southland region (60.8) led the way, closely followed by the Northern region (60.4) which recorded its highest value since November 2007. The Central region (59.9) more than recovered from its dip in expansion in October, while the Canterbury/Westland region (56.7) was the only region to drop from the previous month.

Click here to view the November PSI & PCI
Click here to view PSI time series data
Click here to view PCI time series data

For media comment: Phil O’Reilly 04 496 6552 or Doug Steel 04 474 6923

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