June service index dips

The services sector, which accounts for about two-thirds of the economy, dipped slightly in June, though economists say signs are still good for economic expansion.

The BusinessNZ-Bank of New Zealand performance of services index dipped 0.2 points to 58.6 in May. A reading of 50 separates expansion from contraction, and New Zealand’s services sector has been in expansion since July 2010. The index had bounced 5.6 points in May, after a combination of school holidays and unseasonably wet weather weighed on activity in April.

“The big rebound that the performance of services index [PSI] traced in May pretty much stuck fast in June,” said Bank of New Zealand senior economist Craig Ebert. “With respect to GDP, the recent results of the PSI are obviously supportive of ongoing solid expansion.”

Three of the five sub-indices were higher in June, with supplier deliveries up 1.9 points to 57.4, new orders/ business gaining 0.9 points to 64.1 and stocks/inventories rising 0.5 points to 55.2. Activity/sales dropped 3.5 points to 59.4, giving up some of its 11-point gain from May, while employment dipped 0.2 points to 54.2.

The PSI follows its sister survey, the performance of manufacturing index, which showed manufacturing activity slowed in June as firms reined in employment in the face of growing labour shortages. The Bank of New Zealand-BusinessNZ performance of manufacturing index was a seasonally adjusted 56.2 in June, down 2 points from May.

The composite index, which marries the two surveys, dipped 0.6 points to 58 on a GDP-weighted basis and dropped 1.5 points to 57.6 on a free-weighted basis.