Services Sector records solid growth

The past year (2013) represented a solid story of growth for New Zealand’s services sector, according to the BNZ-BusinessNZ Performance of Services Index (PSI).

The PSI for December was 57.5, up by 1.1 points from November, with the last quarter being the strongest for activity since 2007 (A PSI reading above 50 indicates that the service sector is generally expanding; and below 50 indicating decline). The PSI averaged 55.8 in the past year, compared with 53.9 in 2012 and 52.7 in 2011.

BusinessNZ Chief Executive Phil O’Reilly said that the last quarter of 2013 indicated that the services sector is moving up a gear in terms of expansion.

“While there are always seasonal factors at play during this time of year, the fact remains that new orders and activity/sales are consistently strong, which should feed through into future results. The proportion of positive comments remains high, with many outlining the new level of optimism and positivitly in the market,” he said.

Encouraging signs

According to BNZ Senior Economist Craig Ebert, PSI suggests that production is gathering momentum.

“The new-orders index is by far the fastest component of all, increasing at a rapid rate of knots. We can believe this will be the case for the output index of the PSI over the first few months of 2014,” he said.

All five main sub-indices were again in expansion during December, which has been the case for the last eight months. New orders/business (62.4) continued its top spot, with eight of the last nine results showing a post-60 point value. Activity/sales (59.8) picked up 1.3 points from November, while employment (52.6) dipped in expansion levels after three consecutive months of rising activity. Both stocks/inventories (54.2) and supplier deliveries (52.9) experienced an uplift in expansion from during December.

Positive activity

Activity was positive across all of the country in December.

In the North Island, the Central region (61.0) experienced another increase in expansion to record its first post-60 point value since March 2012.

In contrast, the Northern region (57.4) dipped back to levels of expansion seen in September.

In the South Island, the Canterbury/Westland region (52.6) picked up pace, while the Otago/Southland region (55.1) saw more moderate levels of expansion compared with November.

The seasonally adjusted BNZ-BusinessNZ Performance of Composite Index (PCI), which combines the PMI and PSI for December saw both options for measuring the PCI continue their steady march upwards.

The GDP-Weighted Index (57.5) increased 1.7 points from November, while the Free-Weighted Index (56.9) rose 0.2 points.

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