Service industries sensational

 Tourist attractions like Otago Peninsula yellow-eyed penguins have helped lift the region's service industry activity. Photo by Craig Baxter.
Tourist attractions like Otago Peninsula yellow-eyed penguins have helped lift the region's service industry activity. Photo by Craig Baxter.

It has proved a sensational summer for the Otago-Southland service industry which led the country for activity in January, following on from the success last week of its manufacturing sector.

The BNZ-BusinessNZ Performance in Services Index showed Otago-Southland had a reading of 60.2 points in January - the highest-ranked region in the country.

At the corresponding time last year, the region bottom-ranked on 42 points.

The New Zealand PSI reading was 58.1 in January.

A reading above 50 indicates expansion; the higher the number the stronger the expansion; below 50 indicates contraction.

Last week, the Performance in Manufacturing Index had Otago-Southland well ahead of its nearest rival on 56.4 points.

Otago-Southland Employers Association chief executive John Scandrett, who contributes to the survey, said the positive start to the year was built on expansion levels not seen for several years.

''We're continuing to see strong ongoing expansionary-based tracking on our regional services sector activity levels and, across the January result, it was actually quite difficult to pinpoint areas of negativity.''

The home services and recruitment sub-sectors indicated their January performance was sluggish. But on balance, that usually occurred in the summer holiday period, he said.

The heavily-weighted positive comments coming forward carried references to activity level stability and with the sub-indices, there were bullish figures on sales, new orders and employment outcomes.

''Interestingly, many operators are carrying low stock levels so we might expect to see a fall-off in sales next month depending on how quickly service provision shortfalls can be regenerated,'' Mr Scandrett said.

BNZ senior economist Craig Ebert said the index maintained major momentum in January.

''And the increasingly strongest element of it remained new orders - they are going nuts.''

A seasonally-adjusted index of 66.1 suggested people had not only come back from holidays full of confidence, but were now making things happen.

The surge in new orders fitted with the other story of the latest PSI of inventory slimming at a rate of knots, he said.

''In short, service-sector firms look to be caught short on this account. The stocks variable in January staggered to a seasonally adjusted 45.6. This is the lowest since the Global Financial Crisis was doing its thing back in 2009.

''But far from signalling another time of distress, the latest shrivelling in inventory clearly signals a surprisingly strong upswing in demand.''

Production was running faster to keep up, Mr Ebert said.

The activity/sales reading for January accelerated to 63.2 from 60.1 in December. That was faster than the production index of January's manufacturing index, which was strong enough itself at 59.5.

Together, both indices continued to suggest strong GDP growth was on the way at probably above an annual pace of 4%.

However, that was simply another indicator of how forceful New Zealand's economic momentum was becoming - with other surveys suggesting GDP growth closer to 5%, or even 6%, perhaps being closer to the truth.

The Canterbury-Westland figure of 50.1 came as a surprise, he said. There were abundant signs activity in Christchurch had ramped up. But ever increasing levels might be becoming harder to come by, something that would naturally slow growth.

Central sagged to 48.6, inferring the growth pulse was still coming mainly from the northern region which posted 57.9.

But Otago-Southland was the real mover in January, Mr Ebert said.

The other intriguing element of weakness in an otherwise ''gung-ho'' PSI for January was communications. While usually seen as a fundamentally progressive sector, the communications sub-index plunged to an unadjusted 26.7, from 35 in December.

Mr Ebert was not sure what drove the result but it did not look to be the time of the year as the sub-index had a reading of 58.8 in January last year.

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