The service sector breathed back into life during October, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for September was 57.4. This was up 7.5 points from September, and the highest result since November 2011 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Compared to previous October results, the 2012 value was the second highest recorded since 2007.

BusinessNZ chief executive Phil O’Reilly said that there were certainly some notable reasons to raise a glass for the current results.

“Both activity/sales and new orders/business were either struggling or heading in the wrong direction in recent months, so a strong turnaround for both to lift the overall result has come at the right time. Comments from respondents also provide a telling story. In September, only 47% of comments were positive, which rose to 62% in October.

 “Last month we asked whether the Xmas/seasonal effect would help steer the sector back into positive territory. Looking at those who provided positive comments, this seems to be the case, along with various growth stories outlined citing a larger customer base, improving business efficiency and winning tenders.”

 BNZ economist Doug Steel said, “In the context of some horrible economic indicators for the third quarter, the big bounce in the October PSI is very welcome. While one needs more than one month’s data to be sure of genuine bounce in activity, it is a first step to suggesting a reasonable rebound from a soft patch earlier in the year.”

The seasonally adjusted BNZ – BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for October showed the two options for measuring the PCI back in healthly expansion. The GDP-Weighted Index (56.9) increased 7.7 points from September, with its highest result since March 2010. The Free-Weighted Index (54.9) also showed a pick-up, rising 5.9 points from September. The major influence for both indices was the strong service sector result.

All five main sub-indices were in expansion during October. Activity/sales (64.2) led the way with its highest result since the survey began in 2007. Likewise, new orders/business (62.7) recorded its highest value since November 2007, although almost on par with its result in May this year. Employment (52.1) returned to activity levels last seen in July, while supplier deliveries (54.7) also bounced back from three months in contraction. Finished stocks (51.0) was the only sub-index to experience a fall in expansion levels during October, although consistent with results over the last six months.

Three of the four regions were in expansion during October. In the North Island, the Northern region (60.7) continued its upwards momentum, with its highest value since November 2007. In contrast, the Central region (48.8) showed almost no change from the previous month. In the South Island, the Canterbury/Westland region (56.0) displayed its highest result since June, while the Otago/Southland region (55.6) managed to break the shackles of five consecutive months of contraction to show growth in October.