Service sector activity mixed

The service sector returned to a a more subdued level of expansion in December, the latest BNZ-BusinessNZ performance of services index shows.

Through the run into the Christmas holiday period, there was a very mixed bag of local service sector survey results ranging from a weak September PSI of only 34.4 points to a welcome 60.8 in November, Otago-Southland Employers Association chief executive John Scandrett said.

"We expressed the hope that the November result was the first indication of a steady forward services rebuild, but with the December survey delivering only a mildly expansionary 50.5 point outcome, it seems we're just hovering around a rather neutral break-even position," he said.

Feelings expressed in the December survey supported comments that indicated the sector was experiencing both positive and negative business influences and, in some cases, the diverse opinions arose in the same industry sub-sectors.

"An example is across construction activities where some operators appear to be positive about the forthcoming Christchurch rebuild, but where others are perhaps anticipating long delays in seeing the paperwork needing to be completed before any serious Canterbury-based activity commences.

"Likewise, within the tourism sub-sector there are positive comments around the pre-Christmas good weather period assisting business performance but also remarks addressing disappointment on low visitor numbers and the consequential lack of spending," Mr Scandrett said.

The one area where a consistent commentary had flowed related to retail activities and that was heartening since through many months last year, the retail PSI performance "could only be described as dismal", he said.

Nationally, the PSI for December was 50.6 - down 5.6 points from 56.2 in November and 0.2 points lower than the October result. A PSI reading above 50 indicates the service sector is generally expanding and below 50 that it is declining.

While the PSI had now remained in positive territory for 26 consecutive months, it had struggled to push any higher than moderate levels of expansion.

The results for December and October indicated the sector might struggle for stronger expansion in the near future, BusinessNZ chief executive Phil O'Reilly said.

The December PSI gave a sense of ongoing progression, underscored by its employment component remaining in expansion territory, BNZ senior economist Craig Ebert said.