Service sector receives positive boost for new year

A bounce back for the service sector has seen it record its highest level of expansion for 20 months, according to the latest BusinessNZ Performance of Services Index.

November’s 2011 PSI was 56.6, which was up 5.6 points from 51.0 in October and 3.7 points up from 52.9 in September. The average PSI value for 2009 came to 48.8 while 2010 saw 53.2.

A PSI reading above 50.0 indicates that the service sector is generally expanding, whereas below 50.0 shows it is in decline.

BusinessNZ chief executive Phil O’Reilly said although the manufacturing result through the PMI was rather poor for November, it was pleasing to see the service sector showing some positive momentum towards the end of 2011.

“The proportion of comments from respondents were far more positive in November (65.5%) than October (48.9%), with a post RWC return to business and seasonal effects such as weather and Christmas causing customers to dig into their pockets.”

Recovery in expansion meant all five sub-indices showed expansion in November, led by new orders/business (60.2) followed by activity/sales (58.5), which saw both indices at their highest values since March 2010. Employment (53.0) and supplier deliveries (52.9) experienced near identical levels of growth, while stocks/inventories (50.5) improved marginally on its October value.

“The other pleasing aspect of the November result was that expansion was across the board, including all regions where previously the Otago/Southland area had been struggling. New orders and activity/sales were particularly healthy, which could bode well for the December/January period ahead,” Mr O’Reilly said.

All four main regions showed expansionary activity for the first time since December 2010. The Otago/Southland region (60.8) took the lead followed by the Northern region (60.4), which recorded its highest value since November 2007. Central region (59.9) more than recovered from its decline in expansion in October 2011, while the Canterbury/Westland region (56.7) was the only region to drop from the previous month.