Activity in the service sector continues to be in a weak state, although a slight improvement on the previous month, according to the Bank of New Zealand – BusinessNZ Performance of Services Index (PSI).
The PSI for May stood at 49.1, and although was 0.2 points up from the previous month, was 9.4 points lower than the same time last year. 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 since the survey began is 55.7.
BusinessNZ chief executive Phil O’Reilly said the May result was a mixture of both positive and negative news.
“It was encouraging to see that the index had not shown a worse result than April, and that the Northern and Canterbury/Westland regions had improved to show minor expansion. In addition, some sub-sectors are continuing to show moderate growth. However, in contrast this was still the second lowest result recorded, and significantly down on the same time last year. Comments received from respondents clearly highlight the effects of the slowing economy as spending is down while costs are up.
“Looking at offshore developments, it is pleasing to see that the latest JPMorgan global PSI for May (52.4) showed slight acceleration in activity and new business picking up. While conditions remain soft offshore, a halt in the decline in overseas markets should provide a similar steady pattern of activity in New Zealand in the months ahead, he said.
Four of the five diffusion indices that make up the PSI exhibited some level of decline, with activity/sales (48.3) showing its first contraction. Employment (44.7) followed on from its decrease in March, while stocks/inventories (46.9) and supplier deliveries (47.8) also recorded some level of contraction. In contrast, new orders/business (55.3) picked up from March, but at that level still represents its second worst result.
Activity by region showed most near the ‘no change’ threshold. Both the Northern (50.8) and Canterbury/Westland (50.6) regions improved from April, while the Central region (50.5) continued to fall t0 its lowest level recorded. The Otago/Southland region (41.6) continued to experience a significant weakening, mainly due to ongoing falls in activity/sales.
The various service sectors were a mix of expansion and contraction during May. At one end, both the health & community services (56.8) and property & business services (56.1) displayed healthy growth in May. However, accommodation, cafes & restaurants (36.1) continued to fall, while retail trade (46.1) also experienced another decline in activity. Wholesale trade (51.2) bounced back from the April result to show some level of expansion.
Click here to view the April PSI & PCI
Click here to view the PSI time series data
Click here to view the PCI time series data
For media comment: Georgina Bond, 021 959 831
