Service sector continues weak run through to Xmas

Media release
26 January 2009

Service sector continues weak run through to Xmas

The service sector remained weak through to the end of 2008, according to the Bank of New Zealand - Business NZ Performance of Services Index (PSI).

The PSI for December stood at 48.0, which was up 0.7 points from November but down 5.9 points from December 2007. 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.

Business NZ Chief Executive Phil O’Reilly said that although the result for November was a slight improvement from the previous month, results have remained in a consistent band showing contraction, which will most likely continue through to 2009.

“2008 ended with nine of the 12 months in contraction, and overall a year that most businesses would like to forget. While there were seasonal factors at work for many businesses, comments received from some showed that Christmas did not bring the cheer they may have expected.”

Bank of New Zealand Markets Economist Mark Walton said the best comparison was with the previous December’s results – nearly six points higher - that suggested the 2008 slowdown in the service sector was consistent with the general recessionary environment.

Four of the five diffusion indices that make up the PSI again contracted during December. Activity/sales (45.2) fell further from November, while employment (46.4) dropped 3.1 points from the previous month. New orders/business (49.8) recovered from its worst result in November, although still not showing signs of expansion. Stocks/inventories (49.2) dipped slightly, while deliveries (51.4) continued to seesaw between expansion and decline.

Activity by region was generally positive, with the obvious exception of the Northern region (45.6). This region has now been in contraction for seven consecutive months. The Central region (50.8) experienced a minor lift in expansion for December, although still close to the no-change mark. In the South Island, the Canterbury/Westland region (54.6) continued to show favourable expansion, while the Otago/Southland region (53.8) recovered from a series of poor results to show expansion for the first time since March 2008.

ENDS

© Scoop Media