The service sector in April displayed further signs of expansion, according to the BNZ – BusinessNZ Performance of Services Index (PSI).
The PSI for April was 56.7. This was up 2.5 points from March and the highest result for any month since November 2011. A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining. The 2012 April result was also the second highest value recorded for that month since the survey began in April 2007.
BusinessNZ chief executive Phil O’Reilly said that the upwards swing in expansion for April was built on elements of the index showing some historic highs.
“Both business activity and new orders – which make up the greatest proportion of the overall result – again showed healthy levels of expansion. Adding further impetus, the level of expansion for employment was only bettered by a result going back to mid-2007. Likewise, one has to go back 4-5 years to see stocks/inventories and supplier deliveries at such a high level.”
BNZ Senior Economist Craig Ebert said today’s strong PSI would help in calming nerves over the weak-looking PMI of last week.
“With regard to employment, the PSI and PMI are both upbeat – good news for labour markets.”
The seasonally adjusted BNZ – BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for April showed the two options for measuring the PCI still in positive territory, but a healthy service sector assisting in pulling up one of the measures. The GDP-Weighted Index (55.6) increased 1.1 points from March as the larger weighting of the service sector boosted the overall result. In contrast, the Free-Weighted Index (53.0) fell a further 1.8 points.
All five sub-indices showed expansion in April. This was again led by new orders/business (60.5), which has remained in a relatively tight band of activity since the start of the year. Activity/sales (56.1) bounced back from a drop in March, while employment (55.1) showed further strength by displaying its highest level of activity since June 2007. Both stocks/inventories (53.8) and supplier deliveries (54.7) recorded levels of expansion not seen since July 2008 and September 2007 respectively.
Unadjusted activity was expansionary in all four regions, although some consolidation took place. Both the Northern (52.9) and Central (52.5) regions recorded similar levels of activity in April, with the latter displaying lower levels of expansion compared with the previous two months. The South Island faired better, with the Otago/Southland region (62.6) bouncing back after a drop in March. The Canterbury/Westland region (58.9) continued to show a healthy level of expansion, although a fall in new business and supplier deliveries meant it did not reach the same expansionary levels as March.