The level of expansion continued to ease for the first month of 2008, according to the Bank of New Zealand – BusinessNZ Performance of Services Index (PSI).

The PSI for January stood at 51.9, which was 2.0 points below the December result. A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining. The survey began in April 2007, with an average score of 57.5.

BusinessNZ chief executive Phil O’Reilly said that the dip in activity, which has carried over from the December month, was not an unexpected result given the Christmas holiday season where many service sector businesses shut down or significantly reduced activity.

“The next few months should see a pick up in activity, although other comments received mentioned tightening of belts by consumers. Also, on balance activity in January 2008 was not as high as January 2007, indicating a more sluggish start to the year ” he said.

All five diffusion indices that make up the PSI continued to exhibit expansion, although two of the key indicators produced their lowest result. New orders/business (55.6) again led the way, but produced its second consecutive sub-60 result. Activity/sales (50.2) were close to no change, while employment (51.8) and deliveries (51.1) produced similar results.

Activity by region was again lower for all, with the Otago/Southland region (40.9) continuing to exhibit a sharp decline in activity, which was also evident in December. This was mainly due to very low activity and new order results. The Canterbury/Westland region (55.6) again led the January values, while both North Island regions showed moderate growth.

Most service sectors continued to show expansion for the start of 2008, with accommodation, cafes & restaurants and health & community services (both 56.1) sharing the top spot for activity. The only decline was for wholesale trade (49.1), although the value for January was an improvement on December, and probably indicative of seasonal factors.

The downwards movement on the rate of expansion continues to closely mirror the fall of positive comments received, which fell from 50.2% in December to 43.5% in January.

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

For media comment: Georgina Bond, 021 959 831

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