The BNZ Capital – Business NZ Performance of Services Index (PSI) stood at 53.2 in September, up 1.9 points from August 2009 and 3.1 points from July. This is the third consecutive month this index has shown signs of expansion. And looking year on year, the PSI in September 2009 stood 6.3 points above that recorded in September 2008 (46.9).

Over the last three months the PSI has averaged 51.1 indicating that overall service sector activity is beginning to slowly show signs of expansion. A PSI reading above 50.0 indicates that the service sector is generally expanding.

Two of the five indexes that make up the PSI recorded an expansion in activities between August and September. The activities/sales index continued to record expansion, up 7.5 points between August and September. This is the second largest increase for this index this year, it’s previously largest move was 7.8 points from 43.9 in June to 51.7 in July.

The new orders/business index continues to make small improvements, moving 1.0 points this month from 57.6 to 58.6. The three monthly average value for new orders/business is now sitting at 57.6.

The three other indexes had mixed results with activity at a weaker level. Employment (48.0) and finished stocks (46.9) were down slightly on last month’s results, and deliveries were up 1.4 points to sit at 49.3. Sitting at 48.4, the three monthly average for the employment index recorded its highest result since April 2008. However, despite this improvement, employment has been in contraction for 19 months now.

Results in the various service sectors were generally positive this month. As would be expected, given the slight improvement in overall activity levels, the proportion of negative comments dropped slightly from 49.5 percent in August to 46.8 percent in September. This also compares favourable with the 51.9 percent of negative comments in July and 58.8 percent in June.

Within the sectors, the wholesale trade sector lead the way this month sitting at 60.8, followed by health and community services (56.8). Last month the accommodation, cafes and restaurants sector led the way with the strongest level of expansion (61.8), followed by cultural, recreational and personal services (57.4). This month, accommodation, cafes and restaurants fell back substantially to 40.9.

This improvement in service level activities was also reflected in the four main regions monitored; with three out of the four regions monitored recording a value above 50 in September.

Northern (55.8), Central (50.4), and Canterbury/Westland (51.5) regions all showed levels of expansion in September; however, comparing month-on-month there has been a decline in activity of 1.2 and 2.4 points respectively for the Northern and Canterbury/Westland regions.

From the figure above it can be seen that if we compare three monthly averages year-on-year, the contraction in the Otago region continues but activity levels have improved by 10.2 points. Service sector activity in the Central region has contracted by 5.0 points comparing three monthly averages year-on-year. However, service level activities in the Northern and Canterbury regions have improved by 5.1 and 5.0 points respectively.