Services stay in black thanks to transport

While the transport sector is the best performer, retail and hospitality are still struggling. Photo / Supplied

The services sector managed - just barely and on balance - to stay in positive growth territory last month, according to the BNZ Business New Zealand performance of services index.

The PSI was 51.4, up marginally on October's 51.2 but still the third lowest it has been in the past year. Any number above 50 indicates expansion.

"It is pleasing to see new orders leading the charge among the component indices," BNZ economist Doug Steel said. "This promises a rise in activity ahead."

By contrast, firms' responses on employment and supplier deliveries are at their weakest for more than a year.

When respondents are broken down by industry, the best performer is transport. That is promising, Steel said.

"Transport activity can give a good guide to the general economic pulse, given its role in many economic transactions."

On a three-month rolling average basis, the transport industry's PSI is the highest since the survey began in mid-2007.

"The recent improvement is all the more impressive given the backdrop of rising fuel costs and suggests activity growth is strengthening as we head into 2011," Steel said.

On the other hand, the retail, hospitality, recreational and personal service industries are still struggling, as consumers remain cautious and indicators of tourism, like guest nights, weaken.

The northern region, which includes Auckland, was the most positive, albeit weaker than in September.

Overall, the services sector represents about 70 per cent of the economy.

BNZ economists expect Thursday's September quarter gross domestic product release to record no growth from the June quarter.

"But we still think the economy is in recovery mode, on trend. In our view, a flat result, or thereabouts, should be read as a pause in the broader recovery process," Steel said.

"More timely indicators for the December quarter are already showing a bit more life. Things like car registrations, business confidence and activity indicators, electronic card transactions, and even house sales are among those perking up a bit."