The service sector showed a pick-up in expansion for the start of 2013, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for January was 52.6. This was up 1.1 points from December, following a 3.6 and 2.7 point fall in the two previous 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 January results, the 2013 value was lower than 2012, but higher than 2011.

 BusinessNZ chief executive Phil O’Reilly said that the stop in slipping expansion levels, along with activity/sales and new orders/sales in positive territory, at least starts the year off on a positive note.

 “Activity is certainly patchy, with differences evident across regions, industries and size of business. However, on a wider scale, New Zealand’s result for January sits only marginally below the JPMorgan Global PSI value of 53.6, which shows solid if unspectacular level of expansion.

“Despite the pick-up in expansion, the proportion of negative comments from respondents (52.7%) remains higher than those with positive comments (47.3%), with the comments themselves having a strong seasonal influence due to the Christmas/holiday season.”

BNZ Head of Research Stephen Toplis said that while the global environment has improved in recent months, there still remain significant threats.

 “From New Zealand’s point of view, the strength of its nearest neighbours, rather than the US and Europe, are of greatest interest. While the consensus view about the Australian economy is that it will remain one of the fastest growth areas in the developed world, there are increasing risks to this view.

 “Our exporters are exposed to the Australian economy, and this is facing some significant obstacles to its export sector, including cost structure increases, a high Australian dollar and a lower-cost-supply response elsewhere in the world. However, how China performs will also affect Australia’s strength, and at present there is good reason to be optimistic.”

The seasonally adjusted BNZ – BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for January saw both options for measuring the PCI in expansion after a continued slip at the end of 2012. The GDP-Weighted Index (53.1) increased 1.9 points from December, while the Free-Weighted Index (53.9) rose 3.1 points over the same period. This was the highest result for both measures since October 2012, and the second highest since the middle of 2012.

Only two of the five main sub-indices were in expansion during January. However, these involved the lead sub-indices of new orders/business (57.6) and activity/sales (53.5), which were both up from December. In contrast, employment (49.9) slipped back after a slight pick-up in December, while stocks/inventories (49.9) produced an identical result following last months’ decline in activity. Supplier deliveries (48.1) recovered somewhat from December, although still in contraction.

It was the tale of two Islands when examining activity by region. In the North Island, the Northern region (50.9) continued to slip from the previous month, but remained in positive territory. The Central region (54.4) led the way for January, recovering from a decline in activity during the previous month. In the South Island, the Canterbury/Westland region (49.8) continued to show increased momentum (although still in technical contraction), while the Otago/Southland region (42.0) fell back sharply after three consecutive months in expansion.