Services sector expansion at 3 year high in December; led by hotels, cafes and restaurants

Activity in New Zealand's services sector continued to expand in December, with accommodation, cafe and restaurant activity leading the way, the latest BNZ-Business NZ Performance of Services Index (PSI) showed. The PSI recorded a score of 54.4 in December, and although this was down from 56 in November, it was the highest December score since the series began in 2007. A score over 50 indicates an expansion of activity in the sector, while a score below 50 indicates contraction. The PSI is not yet seasonally adjusted. With the exception of October 2009 (49.9), the PSI has indicated expansion of activity since July 2009 and was strengthened through the winter by large numbers of Australian tourists coming to New Zealand to go skiing. Here are Business NZ's comments on the latest PSI:

The BNZ - Business NZ Performance of Service Index (PSI) for December stood at 54.4. While this was down 1.6 points from November, it was the highest recorded December value since the survey began in 2007. For the second consecutive month all sub-indices were in expansion mode. Although all were lower than November, the seasonal factor of holidays meant a corresponding drop in the level of expansion for that month. The two major contributors to the continuing expansion for December came from activity/sales (55.1) and new orders/business (60.0). Employment (51.1) remained almost unchanged from the previous month, as did stocks/inventories (50.3). Deliveries (52.0) fell 2.3 points, but still the second highest result since February 2008. Activity was again positive for all four main regions during December, with the Central region (60.9) leading the way with its highest result since November 2007. This was followed by the Canterbury/Westland region (56.1), which experienced its highest result since February 2008. The Otago/Southland region (54.4) fell back during the month, while the Northern region (52.5) did likewise. Results for the various service sectors were again almost all in expansion during December. Accommodation, cafes & restaurants (58.4) led the way with another strong result. This was followed by wholesale trade (56.1), health & community services (55.6) and transport & storage (54.7). Property & business services (48.7) experienced a decline in activity, which was mostly due to seasonal effects with businesses closing over that period. All firms by employment size showed expansion during December for the second consecutive month. The larger the business the stronger activity was, with large sized firms (101+ workers) (62.1) experiencing its strongest level of activity since October 2007. The remaining businesses by size were relatively similar in terms of activity, with medium-large sized firms (51-100) at 54.4, followed by small-medium sized firms (11-50 workers) (53.9) and micro sized firms (1-10 workers) (53.3). Despite the dip in the level of expansion during December, the proportion of positive comments from respondents rose to 56.0% in December, compared with 54.5% in November, 49.8% in October, 53.2% in September and 50.5% in August.