Despite a dip in expansion levels, the service sector remains on the right side of growth, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for June was 54.3. This was down 2.3 points from May, although still within a relatively tight band of expansion for the last five months (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Compared to previous June results, the 2012 value was on par with both 2010 and 2011.

BusinessNZ chief executive Phil O’Reilly said that the New Zealand service sector remained in a healthy position, although global stagnation continues to cause concern.

“Although comments from respondents continue to be more positive than negative, there are certainly many swings and roundabouts when individually examined. Issues such as ‘seasonal factors’ and ‘orders from offshore’ fall at either end of the spectrum.

“With global service sector growth at its weakest point in nearly three years, it remains to be seen what type of influence this will have on New Zealand’s position over the second half of 2012.”

BNZ Senior Economist Craig Ebert said, “While June’s PSI details remained frustratingly volatile, its overall level remained clearly encouraging with regards to economic growth.”

The seasonally adjusted BNZ – BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for June showed the two options for measuring the PCI both down from May, as the lower manufacturing and service sector results eased combined activity. The GDP-Weighted Index (53.6) decreased 2.9 points from May as the dip in service sector expansion was not as strong as the fall for manufacturing. The Free-Weighted Index (52.6) decreased 3.5 points to return to a similar level of expansion seen in April.

Despite the small dip in expansion levels, all five sub-indices remained in expansion during June. New orders/business (58.7) continued to lead for the 21st consecutive month, although dipped under the 60 value mark. Activity/sales (54.7) slipped 3.6 points from May, while employment (52.8) recovered somewhat from the previous month. Both stocks/inventories (51.4) and supplier deliveries (51.1) both fell from May, with the latter falling 4.1 points.

Unadjusted activity was again expansionary for three of the four regions. In the North Island, both the Northern (51.8) and Central (55.2) regions experienced lower levels of expansion, with the former returning to activity levels seen in March. In the South Island, the Canterbury/Westland region (58.7) saw an upwards swing in expansion, returning to levels seen in April. The Otago/Southland region (45.0) remained in contraction, dipping a further 1.5 points from the previous month.