Service sector activity slowing and employment contracting

Wednesday October 17, 2012 Kelly Dustow

The BNZ-Business NZ’s monthly Performance of Services Index (PSI) assesses the level of business activity in the service sector in New Zealand. A PSI reading of over 50 indicates an expansion in activity and a reading below 50 indicates a contraction. Service sector business activity for the quarter ending in September is slowing, with the PSI 2.4 points lower than the same period last year. Although not contracting, with a PSI for the September quarter of 51.3, service sector activity is low and hasn’t been this low since May 2011. The PSI includes sub-indexes for different business activities such as sales, new orders and employment. Service sector employment contracted for the three months ending in September.




Employment has fallen from an index of 51.2 for the quarter ending in September 2011 to 49.4 for the quarter ending September 2012. This fall in employment has most likely come from the decline in business activity, with businesses experiencing lower sales and new orders than the same time last year. Although sales and new orders are lower than last year, they have still expanded, with the sales index of 50.7 and new orders index of 55.5.

All regions, except Otago/Southland, are experiencing an expansion in business activity, however at slower rates than last year.





For the three months ending September 2012, the Central region had the greatest expansion with an index of 54.0, followed by the Northern region with 51.0 and Canterbury with 50.7. The only region that contracted was Otago/Southland with an index of 47.6. Compared with the quarter ending in September 2011, business activity declined in the Northern, Central, and Canterbury regions. The only region with improved business activity compared to the quarter ending in September 2011 was Otago/Southland, where the index for the region increased 8.5 points from 39.1 in 2011 to 47.6 in 2012.