Service sector continues to expand

New Zealand's service sector continues to expand for the sixth consecutive month, with its employment levels reaching their highest in three years.

The BNZ-Business NZ performance of services index (PSI) stood at 54.1 points in April, down 2.6 down from March, but 7.2 higher when compared to April 2009. A reading above 50 indicates the services sector is generally expanding.

The average PSI value for 2008 was 49.1, while for 2009 it was 48.8.

So far this year the average score is 54.8.

Business NZ chief executive Phil O'Reilly said though there had been a dip in expansion, the fact the sector has been expanding for six consecutive months provides a stable platform for continued gains in activity, especially employment.

The employment score was 54.3 points, reaching levels not seen since mid-2007, along with being the second highest result since the survey began.

"With its sister survey the Performance of Manufacturing Index also showing a pick up in employment, along with Statistics New Zealand's official unemployment rate dropping for the March quarter, there is a clear indication that many businesses are now in a position to again look at hiring additional staff as orders and activity pick up," Mr O'Reilly said.

BNZ head of research Stephen Toplis said that even though the country's economy was 15 months into recovery mode, there were still differences between sector and businesses.

Wholesale trade and export activity, particulary dairy, logging and tourism, are contributing to economic growth, while retail remains subdued and households remain conservative, he said.

"The expansion so far has only just filled the hole created by the downturn, but with the sixth consecutive month of expansion in the service sector, we remain cautiously optimistic."

Wholesale trade (54.8), property and business services (58.3), cultural, and recreational and personal services (58.3) are expanding. While retail trade (46.3) and accommodation, cafes and restaurants (41.4) were both in decline.

All five of the survey's sub-indices were in expansion mode for the second consecutive month.

Activities/sales was 53.3 with lower levels of expansion compared to March; New orders/business also fell to 57.1, although still at healthy levels.

Supplier deliveries experienced little change compared to the previous month with 50.2 and stocks/inventories increased to its highest level since November 2007 with 52.2 points.

The Central region's service sector again led the way, though lower than March results, with 56.4 points in April. The Northern region displayed a slight expansion standing at 50.8 points, though fell 6.9 points from previous month.

Both South Island regions, Canterbury/Westland (47.4) and Otago/Southland (48.6), showed a decline.