Services shrink faster in June, but there's still some hope

The service sector contracted more quickly in June than in May, but the latest Performance of Services Index (PSI) showed the reading for new orders crept into positive territory last month.

The PSI, produced by BNZ Capital and Business NZ, dropped to a reading of 45 in June, down 1.2 points from May. A PSI reading above 50 indicates the service sector is generally expanding, below 50 that it is declining.

Among the five indexes which make up the PSI, new orders/business tipped into positive territory for the first time since March, and for only the third time in 10 months, with a reading of 50.8.

Activity/sales were unchanged from May at 43.9 points, while employment dipped to 43.6 points after improving the month before. Both stocks/inventories, at 41, and deliveries, at 42.2, dropped to their lowest levels since the survey started.

Business NZ chief executive Phil O'Reilly said the required boost in new business/orders for an overall improvement in the service sector showed some encouraging signs for June.

Among the various industries of the service sector, results were almost all negative, with the lowest recorded by transport and storage (35.3), retail trade (44.3) and wholesale trade (45.9).

Health and community services (48.6), and accommodation, cafes and restaurants (48.4), had the strongest level of activity, with both up from May.

For the first half of 2009, the average PSI value was 45.2, close to the June result, while for 2008 the average PSI value was 49.1 and for 2007 it was 58.1.

- NZPA