Kirk HopeChief Executive

BusinessNZ

20 March 2017

BNZ Senior Economist Doug Steel said “with minimal movement over recent months, and even not all much change of the past four years, it might have some wondering if the PSI is telling us anything at all. In fact, we think it is quite revealing in that the PSI is growing at a strong and steady pace”.

New Zealand’s services sector remains at a stable and solid level of expansion, according to the BNZ - BusinessNZ Performance of Services Index (PSI). The PSI for February was 58.8. Although this was 0.7 points lower than Janu-ary, it was still the second highest level of expansion since November 2015 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). BusinessNZ chief executive Kirk Hope said that the services sector has remained in a consistent and positive level of expansion for the last four months.

“What’s continued to drive solid expansion levels has been in no small part due to the sub-indices of activity/sales and new orders/business remaining over the 60-point mark”.

Stable services

View PSI Time Series Data

58.8 -0.7 expandingFebruary Value Monthly Change Slower rate

BNZ - BUSINESSNZPERFORMANCE OFSERVICE INDEX

Doug SteelSenior Economist

Sales and Orders The PSI details support the headline positivity, with broadbased strength. The sales and new orders components continue to lead the charge – both posting their fourth consecutive month above the 60 mark.

Read more →

Houses and Building Despite the widespread near term positive growth signals above, we are alert to some other indicators cooling over recent months.

Read more →

Steady Strong Service New Zealand’s Performance of Services Index (PSI) remains very strong. Feb-ruary’s 58.8 result is little changed from January’s 59.5. Indeed, the PSI has remained in a tight 58.3 to 59.5 range over the past four months.

Read more →

Good For Growth Ongoing PSI strength in January and February bodes well for GDP growth ahead. So too the bounce in the Performance of Manufacturing Index (PMI) for February published last Friday.

Read more →

Services Landscape

View full BNZ Services Landscape

Main Indices Regional Results

Activity/Sales

Employment54.6

SupplierDeliveries

58.8New Orders

Business61.8

StocksInventories

57.5

60.6

55.8

64.0

58.5

59.8

January 2012 - February 2017

BNZ - BusinessNZ PSI Time Series

National Indices Feb2016

Oct2016

Nov2016

Dec2016

Jan2017

Feb2017

BNZ - BusinessNZ PSI

Activity/Sales

Employment

New Orders/Business

Stocks/Inventories

Supplier Deliveries

Results are seasonally adjusted

PSI Time Series Table

58.857.157.056.455.053.7

57.557.453.252.554.253.8

61.864.061.362.258.062.2

54.653.754.152.454.753.7

60.660.763.264.659.160.2

58.859.558.558.356.857.4

View PSI Time Series Data

53.33 March 2017

J.P. Morgan Global Manufacturing PMITM

International Results

USA

Australia

Eurozone

UK

China

Japan

NZ55.6

53.954.5

52.2

49.0

58.8

51.9

National Indices Feb2016

Oct2016

Nov2016

Dec2016

Jan2016

Feb2017

GDP-Weighted

Free-Weighted

Results are seasonally adjusted

PCI Time Series Table

View PCI Time Series Data

57.456.856.556.555.756.8

58.358.758.057.556.657.0

58.3 57.4GDP-Weighted Index Free-Weighted Index

BNZ - BUSINESSNZPERFORMANCE OFCOMPOSITE INDEX

The seasonally adjusted BNZ - BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) saw the two options for measuring the PCI showing contrasting results. The February GDP-Weighted Index (58.3) decreased 0.4 points from January, while the Free-Weighted Index (57.4) rose 0.6 points. The pick up in the Free-Weighted Index was mainly due to the lift in manu-facturing activity.

January 2012 - February 2017

BNZ - BusinessNZ PCI Time Series

The BNZ - BusinessNZ Performance of Services Index contains data obtained through BusinessNZ’s regional organisations and Hospitality NZ.

Our Contributors

Level 6, JacksonStone House, 3-11 Hunter Street, Wellington 6140+64 4 496 6444 | info@businessnz.org.nz

About the PSI About the PCI

The BNZ - BusinessNZ Performance of Services Index is a monthly survey of the service sector providing an early indicator of activity levels.

A PSI reading above 50 points indicates service activity is expanding; below 50 indicates it is contracting.

The main PSI and sub-index results areseasonally adjusted.

www.businessnz.org.nz/psi

The BNZ - BusinessNZ Performance ofComposite Index (PCI) takes into accountresults from both the Performance ofManufacturing Index (PMI) and thePerformance of Services Index (PSI).Combined results are shown in twoways:

GDP-Weighted Index: Apportions theweight of the manufacturing and servicesindex within the economy to produce anoverall result.

Free-Weighted Index: Combines datafrom both indexes to produce an overallresult.

Both time series for the PCI are thenseasonally adjusted.

ssummers@businessnz.org.nz

Stephen Summers:

Technical Comment

04 474 6923

Doug Steel

04 496 6552

Kirk Hope:

For media comment, contact:

Media CommentSponsor StatementBNZ is delighted to be associated with the Performance of Manufacturing Index (PMI) and BusinessNZ.

The association brings togetherthe significant experience of leading business advocacy bodyBusinessNZ, and business financespecialist BNZ.

We look forward to continuing ourassociation with BusinessNZ and associated regional organisations, and to playing our part in theongoing development of the NewZealand manufacturing sector.

04 496 6564

Steady Strong Service

New Zealand’s Performance of Services Index (PSI)

remains very strong. February’s 58.8 result is little

changed from January’s 59.5. Indeed, the PSI has

remained in a tight 58.3 to 59.5 range over the past four

months. With minimal movement over recent months, and

even not all that much change of the past four years (with

a range of 53.4 to 59.6), it might have some wondering if

the PSI is telling us anything at all. In fact, we think it is

quite revealing. The persistently high level of the PSI

indicates that the service sector is growing at a strong

and steady pace. Indeed, such growth was integral to

NZ posting positive economic growth in last week’s

Q4 GDP figures, when manufacturing and primary

sector activity dipped.

Good For Growth

Ongoing PSI strength in January and February bodes

well for GDP growth ahead. So too the bounce in the

Performance of Manufacturing Index (PMI) for February

published last Friday. All this has seen the PSI and PMI

composite index (PCI) average edge up to 57.9 in February

from January’s 57.7, although a nudge higher than the

56.4 average for the second half of last year. It is

supportive evidence to the idea that economic growth has

picked up a bit in early 2017 following a deceleration in

the final quarter of 2016. It supports our view not to fret

too much about last week’s softer GDP outcome. It even

suggests upside risk to our current economic growth

forecast of 2.7% for 2017, even challenging our broader

view that growth is currently in the process of peaking.

Sales and Orders

The PSI details support the headline positivity, with broad-

based strength. The sales and new orders components

continue to lead the charge – both posting their fourth

consecutive month above the 60 mark. The employment

index edged higher to 54.6 in February to enter its fifth

year without indicating contraction. Meanwhile, on an

unadjusted basis, there were positive PSI results in

February across all industries, regions and firm sizes.

Houses and Building

Despite the widespread near term positive growth signals

above, we are alert to some other indicators cooling over

recent months. This includes slowing in the number of

houses being sold and a dip in the trend number of

consents issued for residential buildings over recent

months, albeit from a historical high level. House sales in

February were nearly 10% lower than a year earlier (after

adjusting for last year’s leap day), while trend residential

building consents in January were almost 5% lower than a

year ago. These are areas to watch amid the general near

term positive signals above regarding the services sector.

doug_steel@bnz.co.nz

Elevated

Good Growth Signals

All Go

Housing Activity Slows

42

44

46

48

50

52

54

56

58

60

62

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

Index, s.a.

Monthly

NZ PSI

Monthly

3-month average

Source: Business NZ, BNZ

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

40

42

44

46

48

50

52

54

56

58

60

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

PCI* and GDP growth

MonthlySource: Statistics NZ, BusinessNZ, BNZ

Index

PCI, 3 months earlier (lhs)

GDP (rhs)

Annual % change

* PCI = A weighted average of the PMI and PSI

40

45

50

55

60

65

70

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

Index, s.a.

Monthly

PSI - Components

New orders

Sales/Activity

Employment

Source: BusinessNZ, BNZ

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

400

800

1200

1600

2000

2400

2800

3200

3600

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

000sBuilding Consents and House Sales(seasonally adjusted, trend)

Sales, seasonally adjusted(advanced three months) (rhs)

Residential Consents, trend (lhs)

Source: Statistics NZ, REINZMonthly

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