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Service sector expansion steady

November 19, 2007

Service sector expansion steady

Expansion levels in the service sector eased slightly during October, according to the Business NZ Performance of Services Index (PSI), but values remained consistent with others recorded this year.

The PSI for October stood at 58.4, which was 0.6 points below the September result. A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining. The survey has now been running for seven months, with an average score of 58.1.

Business NZ chief executive Phil O’Reilly said that although the October result showed a dip in the rate of expansion, new orders/business produced its highest recorded value, which should bode well for the weeks leading up to Christmas.

“Comments received from businesses highlighted a dent in activity due to the All Backs early exit from the World Cup, but longer-term issues such as the continued high interest rates have seen consumers tighten their belts, while staffing issues still remain a concern.”

For the third consecutive month, all five diffusion indices that make up the PSI continued to show expansion. New orders/business (66.0) again led the way, with its highest value recorded. The remaining indices were also largely similar to the previous month, with three of the other four dipping slightly in October.

Activity by region was particularly strong in the top half of the North Island, with the Northern region (60.4) leading the October values with its highest recorded result. At the opposite end, both the Central (54.7) and Otago/Southland (55.3) regions experienced their lowest results.

Most service sectors again showed expansion during October, with wholesale trade (65.8) continuing to dominate with its strongest recorded result. Property & business services (60.2) was the only other sector to produce a post-60 figure, while accommodation, cafes & restaurants (48.4) slipped back to a small decline after three months of moderate expansion.

The dip in the rate of expansion was also reflected in the fall of positive comments received during the current month, which fell from 56.7% in September to 52.0% in October.

Click here to view the October PSI.


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