The BNZ Capital – Business NZ Performance of Services Index (PSI) stood at 47.1 in March, up 0.8 points from February. While this is an improvement on the previous month, this value is well below that seen in March 2008 (50.8). Service indices results for March were similar to what we have seen throughout the first quarter of 2009. However, over the last three months the PSI has averaged 45.4 indicating that overall service sector activity has continued to contract throughout 2009. A PSI reading above 50.0 indicates that the service sector is generally expanding.

While the index for activity/sales (47.8) lifted to its highest value since July 2008, if we look at three monthly averages this indice has had an average value of 42.7. In this regard, across the indices it lead the weakening of service sector activity this quarter. The activity/sales indice has recorded values below 50 since March 2008.

Employment (44.8) remained weak in March, with all firms by employment size experiencing contraction. Contraction also continued in the various service sectors, where results and sentiment were generally negative. This weakness was reflected in the four main regions monitored. Only the Canterbury region recorded a value above 50 in March, just. Comparing three month averages year-on-year, the Central region has continued to stay above 50, just, but the Northern and Otago regions have contracted markedly.

Looking across the Tasman, service sector activity has continued to contract in Australia but latest PSI figures suggest that this contraction is beginning to ease. The Australian Industry Group-PricewaterhouseCoopers Australian PSI rose by 3.4 points in March 2009 to 35.6. All indices continue to be below 50 as seasonally adjusted activity declined in all sectors in March, and activity fell in all states.