While the service sector experienced its seventh consecutive month of expansion, comments from businesses showed the weather played a role as activity softened slightly in May, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for May was 53.3. This was 0.6 points down from April, but up 5.2 points from May 2009. 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 54.4.

BusinessNZ chief executive Phil O’Reilly said while March showed a significant boost in overall activity, the other six months of expansion since November had been fairly consistent. Any hope of stronger expansion in May after the dip in April was always going to be difficult given recent weather conditions.

“Weather is often a double edged sword for the service sector, as some businesses depend on fine weather while others enjoy better trading during winter. However, on balance the strong concentration of negative comments from respondents show the wild and wet conditions during May led to a less than ideal month for day-to-day activity for many.”

Bank of New Zealand Economist Doug Steel said May’s result had an air of growth consolidation. This was apparent as May’s results equalled the PSI average of the last seven months, he said.

“A growth consolidation theme is also consistent with the mix of results in the detail of May’s PSI. Sales have risen and new orders have fallen a little, but these indices are now close to each other, indicative of growth at a sustainable level.”

All five sub-indices were in expansion mode for the third consecutive month – the first time since late 2007. Encouragingly, activities/sales (55.0) rose 1.7 points from April, although new orders/business (55.7) dipped to its lowest value since October 2009. Employment (50.8) slipped 3.6 points from April to reach a similar level to February. Supplier deliveries (51.2) returned to a similar level experienced in January, while stocks/inventories (50.9) returned exactly to its March result.

Unadjusted activity was positive in the North Island, but negative in the South Island. The Central region (54.9) again led the way, albeit with a lower score than in April. The Northern region (52.4) improved 1.6 points from April after a significant fall the previous month. Both South Island regions remained in contraction in May, with the Canterbury/Westland region (44.7) slipping further. The Otago/Southland (48.3) region was largely unchanged from April.

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

For media comment: Doug Steel 04 474 6923 or Kathryn Asare 021 555 744.

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