Starting on the right note

Starting on the right note

The services sector started the year on the right note, with expansion improving during January, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for January was 57.8. This was 1.1 points up from December, and the highest overall value since July 2014 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining).

BusinessNZ chief executive Phil O’Reilly said that after its sister survey the PMI showed a drop in the rate of expansion during January, the continued healthy performance of the PSI is encouraging.

“A number of seasonal factors come into play around this time of year when looking at comments from respondents. However, for those providing positive comments the general view is that the confident and upbeat economy at present means there are various opportunities for businesses to boost activity and assist their bottom line”.

BNZ senior economist Craig Ebert said, “The relative health in the latest PSI gels well with a burgeoning labour market, high net inward migration and a reheating housing market. It’s a big relief to see the PSI get even stronger in January, compared to the abrupt slowing of its manufacturing cousin the PMI.”

For the eighth month running all five main sub-indices were in expansion. New orders/business (61.4) increased 0.5 points from the previous month to lead the charge for January. This was followed by activity/sales (60.2), which rose 2.7 points from December. Employment (54.5) returned to levels of expansion seen during the third quarter of 2014, while both supplier deliveries (55.8) and stocks/inventories (53.9) eased in terms of expansion from December.

Activity remained positive throughout the country, although again there were regional differences. In the North Island, the Northern region (52.5) dropped 5.1 points to record the lowest rate of expansion during January, while the Central region (60.1) experienced levels of expansion not seen since July 2014. In the South Island, the Canterbury/Westland region (57.3) recovered from a fall in the rate of expansion during December, while the Otago/Southland region (64.7) stayed roughly similar to values shown in recent months.

The seasonally adjusted BNZ - BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) saw the two options for measuring the PCI experience contrasting movements during January. The GDP-Weighted Index remained at 56.8 for January, while the Free-Weighted Index (54.7) decreased 2.3 points from December. The fall in the free weighted index was primarily due to the drop in manufacturing activity during the first month of 2015.

Link to the January PSI and PCI

Link to PSI time series data

Link to PCI time series data

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