Uplift for service sector

Business NZ chief executive Phil O'Reilly

The service sector received another boost in expansion to record its highest result since November 2007, according to the BNZ - Business NZ Performance of Services Index (PSI).

The PSI for March stood at 57.3. This was 3.6 points up from February, and up 10.2 points from March 2009. A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining. The average PSI value for 2007 was 58.1, while for 2008 it was 49.1. For 2009, the average score was 48.8.

Business NZ chief executive Phil O'Reilly said the key indicators of production/sales and new orders/business both recording strong results was the most pleasing aspect of the March results.

"The proportion of positive comments from respondents are also heading in the right direction, with a clear majority now finding favourable influences in their day-to-day business activities. When looking at comments from those still finding conditions difficult, words such as "caution" and "flat" tend to dominate. There are many businesses still finding trading conditions tough, but at least the focus for many has moved away from lack of demand and general economic uncertainty," said O'Reilly.

Bank of New Zealand senior economist Craig Ebert said the PSI is now akin to the level of about three years ago, before the recession took hold.

"While the pick up in the services sector is what economists have been forecasting, it's certainly good to see clear signs of it coming through, when there is not overwhelming evidence of it in hard data yet," said O'Reilly.

All five sub-indices were in expansion mode, with activities/sales (62.9) breaking through the 60-point mark for the first time in 28 months. New orders (62.7) increased 3.8 points from February to also record a post 60-point result. Employment (51.9) partly recovered from February to record its sixth consecutive expansion, while supplier deliveries (53.1) improved after two months indicating little change. Stocks/inventories (49.7) remained in contraction, albeit close to the level of no change.

Activity was positive for all four main regions during March, with the Central region (64.9) leading the way with its highest value since May 2007. The Northern region (57.7) continued to display solid activity, while the Canterbury/Westland region (54.4) recovered from contraction in February to reach activity levels close to what was seen at the end of 2009. The Otago/Southland region (52.5) slipped further in March, although still in positive territory.