The service sector was in a complete holding pattern in August, according to the BNZ – BusinessNZ Performance of Services Index (PSI).
The PSI 50.0, down 2.4 points from July, the fourth consecutive fall in expansion (A PSI reading above 50.0 indicates that the service sector is expanding, while a reading below 50.0 means it is declining).
Compared to previous August results, the 2012 value was the second lowest recorded since 2007.
BusinessNZ chief executive Phil O’Reilly said that the dead-even result for the service sector activity was due to positive or negative results of businesses.
“Comments were almost split down the middle between those finding current conditions either positive or negative for activity. Like last month, a general slowdown and lack of demand continues to adversely affect some, while trying to establish the main reasons for positive business activity is difficult given the wide spectrum of comments.
“Looking beyond the comments, of particular concern is the employment result, which, combined with the weak employment result for the manufacturing sector shows that one would have to go back to 2009 to record a lower composite figure,” he said.
BNZ senior economist Craig Ebert said, “The degree of slowdown in August’s PSI, along with the seizure in its employment component, certainly asks questions about the economy’s momentum.”
The seasonally adjusted BNZ-BusinessNZ Performance of Composite Index (PCI), which combines the PMI and PSI for August showed that the two options for measuring the PCI both in contraction, as negative manufacturing activity and a sluggish service sector pulled results lower.
The GDP-Weighted Index (49.6) decreased another 2.2 points from July, showing its first decline in activity since July 2010. The Free-Weighted Index (48.9) fared worse with a lower overall result, and in contraction for the first time since October 2011.
Stark differences
Looking more in-depth at the August PSI result, although the overall result showed no change, there were considerable differences within the five sub-indices for August. New orders/business (55.4) again led the charge, although at its lowest point since December 2011. Activity/sales (51.0) slipped another 0.8 points, while stocks/inventories (51.8) increased 0.5 points from July.
Supplier deliveries (46.6) continued its trend downwards, while employment (46.5) experienced the largest drop of 5.8 points from July to be at its lowest point since June 2009.
Regional performances
In a reversal from July, unadjusted activity was in contraction for three of the four regions. In the North Island, the Northern region (49.4) experienced its lowest level of activity since October 2011, while the Central region (57.9) again improved its level of activity and showed expansion for August. In the South Island, the Canterbury/Westland region (47.9) fell back into contraction after 12 consecutive months of expansion, while the Otago/Southland region (46.1) continued to hover within the 45-50 point mark. Source: BusinessNZ, Wellington
