PSI signs 'encouraging'

A survey of the service sector pushed further into expansion in September, helping bring some balance to a run of poor economic indicators.
Seasonally adjusted, the BNZ - Business NZ performance of service index (PSI) for September was up 2.9 points from August to 54.8. A reading above 50 indicates services activity is expanding.
BNZ economist Doug Steel said the latest PSI was an encouraging sign following a string of generally weak and disappointing economic indicators in the June quarter and much of the September quarter.
Although only time would tell if it was the forerunner to a more general economic improvement, it joined a list of indicators that had ticked up in September and October, Steel said.
"Underneath it all, we judge that there was some improvement in underlying spending in September over-and-above the pre-GST boost. This is consistent with a pick up in the services sector this month."
It was also encouraging that all major components of the latest PSI showed improvements from August.
A reading of 57.4 for the sales/activity category was more than 6 points up on the recent trough in July, although it probably benefited from a boost ahead of the GST rise, Steel said. But new orders were less likely to have been influenced from the change in GST, and that category was up to 57 from 54.3.
That was clearly a positive signal for sales and activity for the fourth quarter and beyond, as was a further improvement in the employment component, which lifted to 53.5 in September from 52.1 in August.
Improvement in the PSI was recorded across all firm sizes, with small firms the underperformers at 51.8, while larger-firm indicators ranged from 59 to 61.5.
Of the Canterbury-based respondents that did comment about the earthquake as the major influence on their business over the past month, negative responses outweighed positive responses by a ratio of 5 to 3.
Many respondents, from all over the country, also noted the weather as a major influence on activity during September, mostly with negative comments, Steel said.
If unusually wild weather during September had dented overall results, it made the gain in the PSI in September even more meaningful in an underlying sense.
Despite the good signs, clear areas of weakness remained, including accommodation, cafes, restaurants and general retailing, along with cultural, recreational and personnel services.