New Zealand’s Service Sector remains at a consistent level of positive activity, according to the BNZ-BusinessNZ Performance of Services Index (PSI).
The PSI for June was 55.0. While this was a slightly lower rate of increase than May, the PSI has averaged 55.3 since the start of the year (A PSI reading above 50.0 indicates that the Service Sector is generally expanding; below 50.0 means a decline). Compared to previous June results, the 2013 value was the highest since the June 2007 value.
BusinessNZ chief executive Phil O’Reilly said that like its sister survey, the PMI (Purchasing Managers Index), the PSI is now developing a trend of consistent and positive growth.
“The first six months of 2013 represent the best first half of the year since the survey began in 2007. Comments from respondents remain far more positive than negative, and focus on stronger activity, continuing growth and a sense of confidence back in the market,” he said.
BNZ Economist Doug Steel said, “It is good to see positive growth coming through in the hard data too, in line with what the PSI has been indicating all year.”
Expansion ahead
All five main sub-indices were again in expansion during June. New orders/Business (59.7) continued to lead the field, increasing 0.4 points from May. Activity/Sales (57.1) also increased from May, while employment (50.1) fell back to the level of all, but no change. Stock/Inventories (53.8) rose 0.4 points, while supplier deliveries (55.0) fell 1.1 points, although still exhibited healthy expansion.
Activity was positive throughout the country in June.
In the North Island, the Northern region (54.9) fell back 3.7 points to its lowest level since January. The Central region (50.9) also fell back 2.3 points from May, but remained in slight expansion. In contrast, the Canterbury/Westland region (53.3) went back into expansion after two consecutive months in contraction, while the Otago/Southland region (56.9) continued to show more positive growth, with its highest result since March.
The seasonally adjusted BNZ – BusinessNZ Performance of Composite Index (PCI), which combines PMI and PSI) for June saw both options for measuring the PCI come off recent highs in activity. The GDP-Weighted Index (55.0) decreased 1.4 points from May, while the Free-Weighted Index (55.2) decreased 2.4 points over the same period. The drops were due to the manufacturing and service sectors coming off a strong May result.
Firm growth
The service sector has a firm growth pulse – at least that is what PSI has been telling us all year. May be not a gold medal performance, but surely silver.
The story continued in June. True enough that the PSI eased a touch to 55.0 from 56.0 last month, but such a move is well within the usual monthly noise. More telling is that another reading in the mid-50s, well above the 50 mark that distinguishes progress from contraction, points to a decent rate of expansion for the biggest sector of the economy.
The drivers of a positive PSI in July looked familiar; namely strong sales activity and even stronger new orders. Both indicators were higher than a month ago, but again, the degree of change is immaterial. Still, a new orders index at close to 60 is getting up there and bodes well for expansion ahead.
This is all good stuff, but is the PSI positivity showing up in the hard data? After all, it is a sample survey of a very big sector. Could it be misrepresenting the broad trends?
To try and get a feel for this, we cast our eye over a few indicators. Some are either a direct measure of service sector activity (like accommodation guest nights) or closely associated with service sector sales (like building consents and associated professional services). Some have strong elements of both aspects, like house sales providing an indicator of real estate agent service as well as other associated professional services.
The above is a BNZ-BusinessNZ Survey of the New Zealand economy for June 2013. BNZ is the Title Sponsor of the Indian Newslink Indian Business Awards 2013 and Sponsor of the Best Large Business Category and the Supreme Business of the Year Award.
