Activity in the services sector continued its march upwards with some levels of activity not seen since 2007, according to the BNZ - BusinessNZ Performance of Services Index (PSI).
The PSI for January was 58.1. This was up 0.5 points from December, and the highest level of activity since November 2007 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Over the last 6 months, the PSI has averaged 56.5.
BusinessNZ chief executive Phil O’Reilly said that the positive start to the year was built on expansion levels not seen for a number of years.
“In addition to the overall index at a seven year high, the key sub-indices of new orders/business and activity/sales were also the highest since 2007. With positive comments coming from over two-thirds of respondents during January, this augers well for continued expansion in the months ahead.”
BNZ senior economist Craig Ebert says “New orders are going nuts in New Zealand’s services sector. This suggests people have not only come back from holidays full of confidence, but are now making things happen.”
Three of the five main sub-indices were in expansion during January, which breaks an eight month cycle of all indices being in expansion. However, the drop in stocks/inventories (45.6) and supplier deliveries (47.7) is not unexpected given seasonal effects around this time of year. Of those expanding, new orders/business (66.1) broke free of a low 60-point value to record its highest result since June 2007. Activity/sales (63.2) picked up a further 3.1 points from November to record its highest level since August 2007. Employment (55.2) also showed further expansion, with its best result for 21 months.
Activity was positive across most of the country in January. In the North Island, the Northern region (57.9) displayed similar levels of activity compared with December, while the Central region (48.6) experienced its first decrease in activity since March 2013. In the South Island, the Canterbury/Westland region (50.1) only just managed to keep its head above water, while the Otago/Southland region (60.2) recorded a post 60-point value for the second time in three months.
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 tick up from the previous month. The GDP-Weighted Index (57.9) increased 0.2 points from December, while the Free-Weighted Index (57.4) rose 0.4 points. The fact that the services sector showed stronger expansion in January meant the GDP index continued to keep its nose in front in terms of expansion.