Expansion in the services sector eased back during May, according to the BNZ - BusinessNZ Performance of Services Index (PSI).
The PSI for May was 54.2. This was down 4.3 points from April, although still showing higher expansion than the February result (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). The PSI has averaged 56.4 points so far for 2014.
BusinessNZ chief executive Phil O’Reilly said that easing expansion levels should not undermine the fact that the sector is still in positive territory.
“While sales activity was not as solid as the previous month, new orders/business remained strong, which was a consistent theme in the type of positive comments received from respondents. On the flip side, negative comments did not display any strong trend, apart from typical seasonal/weather related issues this time of year”.
“Overall, given the fact that nearly 60% of comments received were along a positive line confirms the sector remains in good heart”.
BNZ Economist Doug Steel said the service sector was part of likely above-trend economic growth in Q1 this year and the PSI suggests more of the same in Q2, despite easing in May.
Despite the dip in expansion levels, four of the five main sub-indices were still in expansion during May. New orders/business (60.6) reduced 5.5 points from April, but remained in strong territory for expansion. Activity/sales (54.3) slipped 7.2 points to record its lowest result since January 2013. Employment (52.4) continued to edge downwards, while stocks/inventories (53.1) fell 2.6 points. Supplier deliveries (49.5) went into slight contraction for the first time since January.
Activity remained positive throughout the country. In the North Island, the Northern region (55.5) reverted back to levels seen in August 2013, while the Central region (51.2) fell back after three consecutive months of solid results. In the South Island, the Canterbury/Westland region (54.5) remained in positive territory despite easing expansion, while the Otago/Southland region (51.3) managed to keep its head above water with minor expansion.
The seasonally adjusted BNZ - BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for May saw the two options for measuring the PCI both ease from the previous month, although they remain in expansion. The GDP-Weighted Index (54.0) decreased 4 points the previous month, while the Free-Weighted Index (54.3) dipped 2.7 points.