Services sector grows at a slower pace

Phil O'Reilly Photo /Mark Mitchell

New Zealand's services sector has recorded its highest October result in three years, despite a fall in expansion in the last month, BNZ-BusinessNZ performance of services index shows.

Despite the dip, service sector activity continued to keep its head above water.

The October index fell 2.9 points from September to 52.0 which was the highest October result since 2007, when the PSI reached 57.7.

A reading above 50 indicates services activity is expanding.

BNZ head of research Stephen Toplis said the latest PSI reflected the slow but consistent expansion of the economy.

"(However)... it's remarkable that confidence is as high as it is given that business on average was being adversely impacted by the Canterbury earthquake, the Southland storms, the post GST sales' malaise and ongoing softness in housing market activity across the nation," he said.

Business NZ chief executive Phil O'Reilly said while it was disappointing the October result didn't improve on September's, the sector remained on "the right side of the ledger".

"The sector has now experienced one full year in expansion, with healthy levels of new orders/activity continuing momentum for future months. No doubt for many, the approaching Christmas period may provide additional impetus, as well as better weather conditions," he said.

Unadjusted activity by region returned to a similar pattern earlier in the year, with the North Island showing expansion and the South Island showing decline.

The northern region led the way at 55.3 although it was down 3.2 points from September.

The central region, at 51.5, suffered a similar drop from the previous month, returning to levels seen in June.

However, the South Island experienced a consistent level of decline, with Canterbury/Westland, at 45.0, and Otago/Southland, at 45.5, falling back into contraction for six of the past seven months.

New orders/business fell 3.8 points to 53.1 and activity/sales fell 2.4 points to 54.9 - reversing gains made in September.

Employment was flat in October, down 3.6 points from the previous month to 49.8, bringing to the lowest value since November 2009.

Meanwhile stocks/inventories were largely unchanged from September at 50.1, while supplier deliveries fell 2.5 points to 50.5.

- NZ HERALD ONLINE / NZPA