Service sector activity expands in September as sales, new orders rise (Update 1)

Activity in New Zealand's services sector expanded for the third consecutive month in September as sales and new orders rose from August, the latest BNZ Capital-Business NZ Performance of Services Index (PSI) shows. (Update 1 includes full details, comments, chart.) The PSI recorded an unadjusted score of 53.2 in September, from 51.3 in August. This is the highest PSI score since February 2008 and above the 50 threshold signifying expansion. The PSI, which was launched in 2007 is not yet seasonally adjusted. However, the employment component of the PSI fell from August and recorded its 19th consecutive month in contraction. Regionally, Otago/Southland was the only part of the country to experience contraction from August. Canterbury/Westland's and Central region's expansion rate slowed, while the Northern region expanded at a faster rate than in August. The September PSI was up from a contractionary 46.9 in September 2008, but still below 59 in September 2007. See Bernard Hickey's comments below in an Economic weather report. Here are Business NZ's comments on the figures:

Like August, only two of the five diffusion indices that make up the PSI exhibited expansion, but involved the two key indicators of activity/sales (58.0) and new orders/business (58.6) that increased 7.5 points and 1.0 point respectively. The former was the highest result since November 2007. Employment (48.0) slipped back slightly from the August result, and remains in contraction now for 19 months. Stocks/inventories (46.9) also slipped back from the previous month, while deliveries (49.3) continued to show upwards movement to reach its highest result since March 2009 (albeit still in decline). Activity was positive for three of the four main regions during September, with the Northern region (55.8) recording its highest result since November 2007, as well as the strongest regional result for the current month. The Central region (50.4) fell back slightly from August, although still exhibited slight expansion. The Canterbury/Westland region (51.5) also experienced a dip in expansion after consecutive values above 53.0, while the Otago/Southland region (45.6) dropped back to levels experienced in June/July after a brief recovery in August. Results for the various service sectors were mostly positive for September, with wholesale trade (60.8) showing significant improvement from August and leading the way for September. This was followed by health & community services (56.8) and retail trade (54.8). Accommodation, cafes & restaurants (40.9) fell back from August, as did property & business services (47.9). Two of the four firms by employment size showed expansion during September, with small-medium sized firms (11-50 workers) (58.2) continuing to build on results over previous months. Medium-large sized firms (51-100 workers) (52.1) experienced a dip from August but still in expansion, while large sized firms (101+ workers) (46.7) went into decline for the current month. Micro sized firms (1-10 workers) (49.9) was largely unchanged for September. The improvement in overall activity levels was again mirrored by the proportion of negative comments from respondents dropping to 46.8% in September, compared with 49.5% in August, 51.9% in July and 58.8% in June.