Services sector turns positive

Monday 17th August 2009

New Zealand’s services industry climbed out of contraction for the first time in 16 months, as a jump in new orders added to signs the economy is emerging from its worst downturn in 30 years.

The Bank of New Zealand – Business NZ Performance of Services Index (PSI) rose 5.1 points to 50.1 in July, up from 45 in June. The index was at 45.6 in July 2008. A measure above 50 signifies the sector is expanding. New orders/business jumped to 56.5 from 50.8 in the previous month.

New Zealand will recover from recession toward the end of this year with a “patchy recovery,” Reserve Bank Governor Alan Bollard said on July 30, when he kept the official cash rate at a record low 2.5%.

Since then, government figures showed retail sales unexpectedly rose 0.4% in the second quarter while the ASB Housing Confidence survey showed more people say it is a good time to buy a house.

“The PSI new orders index probably does signal genuinely higher production is in store,” said Bank of New Zealand economist Craig Ebert. “The overall, and underlying, trends remain encouraging, following the severe points of contraction of early this year.”

The PSI sunk as low as 42.7 in January, when the measure of sales/activity fell to 37.3.In the latest month, sales/activity turned positive for the first time since March 2008, with a reading of 51.7.

Stocks/inventories remained weak at 42.1, underlining “the evidence of aggressive culling of inventory in the services sector,” Ebert said. This could be taken as good news as a sign companies are ‘clearing the decks.”

Supplier/deliveries rose to 46 from 42.2. Employment improved to 47.9 from 43.6.

Businesswire.co.nz

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