New Zealand's service sector showed signs of growth last month, but some areas of the sector still face difficult times.

The BNZ-Business NZ Performance of Services Index (PSI) was up 2.2 points to 55.7 last month - the highest June result since 2007.

A reading above 50.0 indicates the sector is expanding.

The average PSI result for 2008 was 49.1, while in 2009 it was 48.8. The average score for this year to date is 54.7.

Business NZ chief executive Phil O'Reilly said expansion had been steady for several months, but "digging behind the main numbers shows some strong contrasts in terms of expansion and decline".

"The word patchy has been well used recently to describe how many sectors have been performing, and this is certainly true when the June results are broken down by region, industry or size."

All five sub-indices were in expansion mode for the fourth consecutive month, with four of them recording a higher value than in May.

Activities/sales (57.9) rose 2.6 points from May, while new orders/business (59.0) rose 2.9 points.

Employment (55.2) experienced the greatest lift, rising 4.5 points from May to record its highest level since June 2007, while supplier deliveries were at 51.7 points.

The laggard was inventories, with 50.2, but this was not necessarily a bad sign if it reflected stocks were being well managed, BNZ senior economist Craig Ebert said.

Unadjusted activity was positive in the North Island, but negative in the South Island.

The Northern region (58.1) led the way with activity for the first time since September 2009.

The Central region (51.6) dropped 3.3 points from May, but still remained in expansion.

In contrast, both South Island regions remained in contraction for the third consecutive month.

The Canterbury/Westland region (46.0) improved slightly from May, while the Otago/Southland region (38.7) experienced a significant fall.

A return to levels of expansion before the global recession hit required broad, consistent growth in all facets of the service sector, O'Reilly said.

- NZ HERALD

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