Kirk HopeChief Executive

BusinessNZ

15 November 2016

second highest level for the last five months. Also, employment (54.7) bounced back to its highest level of expansion since May.”

Regarding the latest PSI results, BNZ Senior Economist Doug Steel said “the PSI indicates above trend economic growth is continuing. Strong results right across the distribution sector is more evidence of buoyant domestic spending and a booming tourism industry”.

New Zealand’s services sector experienced a pick-up in expansion during October, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for October was 56.3. This was 2.1 points up from September, and similar to results mid-way through 2016 (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 after a drop in expansion during September, the pick-up was welcome, with all sub-indices showing stronger results.

“It was welcoming to see the key indicators of activity/sales (58.4) and new orders/business (56.3) showing stronger expansion, with the former at its

Onwards and upwards

View PSI Time Series Data

56.3 +2.1 expandingOctober Value Monthly Change Faster rate

BNZ - BUSINESSNZPERFORMANCE OFSERVICE INDEX

Doug SteelSenior Economist

Property Less Positive

The PSI for the property and business service industry, while still positive at 52.3 in October, has slowed a bit over recent months.

Read more →

Brighter Days

Last month, we wondered if the Performance of Services Index (PSI) had been dented a bit by such things as poor weather perhaps in combination with the school holidays. Whether this was actually the case or not is difficult to tell, but the PSI did bounce back to a firm 56.3 in October from its dip to a middling 54.2 in September.

Read more →

Spending Up

Current spending indicators are unequivocally strong. In the PSI, retail was one industry that stood out in October. Its 63.6 reading, on an unadjusted basis, was the second strongest across industries.

Read more →

Services Landscape

View full BNZ Services Landscape

Main Indices Regional Results

Activity/Sales

Employment54.7

SupplierDeliveries

54.6New Orders

Business56.3

StocksInventories

54.0

58.4

52.9

57.4

60.5

63.0

April 2007 - October 2016

BNZ - BusinessNZ PSI Time Series

National Indices Oct2015

Jun2016

Jul2016

Aug2016

Sep2016

Oct2016

BNZ - BusinessNZ PSI

Activity/Sales

Employment

New Orders/Business

Stocks/Inventories

Supplier Deliveries

Results are seasonally adjusted

PSI Time Series Table

54.651.956.147.555.555.7

54.053.355.951.553.555.9

56.355.860.357.358.256.8

54.751.654.453.854.552.9

58.457.361.457.357.857.4

56.354.257.854.456.556.0

View PSI Time Series Data

53.24 November 2016

J.P. Morgan Global Manufacturing PMITM

International Results

USA

Australia

Eurozone

UK

China

Japan

NZ53.5

54.852.6

52.0

50.5

56.3

48.2

National Indices Oct2015

Jun2016

Jul2016

Aug2016

Sep2016

Oct2016

GDP-Weighted

Free-Weighted

Results are seasonally adjusted

PCI Time Series Table

View PCI Time Series Data

55.4 55.856.755.557.154.3

56.354.757.654.656.755.8

56.3 55.4GDP-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 show contrasting results in expansion from Sep-tember to October.

The October GDP-Weighted Index (56.3) increased 1.6 points from September, while the Free-Weighted Index (55.4) slipped 0.4 points. The increase in the GDP-Weighted result was mainly due to a stronger PSI value for September, while the dip in expansion levels for the PMI outweighed the pick-up in the PSI for the Free-weighted Index.

April 2007 - October 2016

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

Brighter Days

Last month, we wondered if the Performance of Services

Index (PSI) had been dented a bit by such things as poor

weather perhaps in combination with the school holidays.

Whether this was actually the case or not is difficult to tell,

but the PSI did bounce back to a firm 56.3 in October from

its dip to a middling 54.2 in September. Large firms

recovered from a drop last month. So the PSI is back

above its long term average of 54.1, indicating more

above-average economic growth. A stronger employment

index emphasises the point. That said, the bounce in the

PSI is not to deny that the trend has slowed a bit from last

year. And we are keeping an eye on slower new orders

over the past two months (which were also, at least

relatively, a softer point in a generally robust PMI from

last week). It all fits with our view that while we think

economic growth will be above average in 2017, it may

just be a touch slower than that achieved in 2016.

Spending Up

Current spending indicators are unequivocally strong.

In the PSI, retail was one industry that stood out in

October. Its 63.6 reading, on an unadjusted basis, was the

second strongest across industries. This, and the latest

data showing October electronic card transactions around

6% higher than a year ago, suggests that retail sales in the

final quarter of the year is pushing on from what we think

will be a fundamentally strong retail sales report for the

third quarter of the year (due tomorrow). Indeed, it is easy

to imagine even more quarterly sales volume growth than

the +0.8% we anticipate in that report given the likes of

the tightening labour market, house price inflation, and

booming tourism. But we are wary that the prior quarter’s

sales growth (+2.3%) was the strongest in nearly 10

years. Still, with annual volume growth likely to exceed

5% in tomorrow’s report and the positive initial indicators

for the Christmas quarter there is clearly a strong growth

pulse in underlying spending. An ongoing tourism

boom is part of this. Indeed, the tourism-associated

accommodation, cafes and restaurants industry in the PSI

was even stronger than retail itself with an unadjusted

reading of 68.8. This is the highest October reading for

this industry since the PSI survey began nine years ago

(even surpassing the 68.0 recorded in October 2011 when

NZ hosted the Rugby World Cup). Underscoring the

strength in the distribution sectors more generally was

wholesale (+61.2) and transport and storage (+60.0).

Property Less Positive

The PSI for the property and business service industry,

while still positive at 52.3 in October, has slowed a bit

over recent months. This may relate to the latest LVR

restrictions on housing or perhaps, more generally, the

market sensing interest rates may not go any lower.

doug_steel@bnz.co.nz

Back Above Trend, But Trending Lower?

The Tills Rang This October

Boom

Some Slowing

42

44

46

48

50

52

54

56

58

60

62

Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16

Index, s.a.

Monthly

NZ PSI

Monthly

3-month average

Source: Business NZ, BNZ

30

35

40

45

50

55

60

65

70

Oct 2007 Oct 2008 Oct 2009 Oct 2010 Oct 2011 Oct 2012 Oct 2013 Oct 2014 Oct 2015 Oct 2016

Retail Trade PSI(October months)

Index

Source: Business New Zealand, BNZ Index

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15

Annualtotal(mil)

Monthly

Overseas Visitor Arrivals

Source: BNZ, Statistics New Zealand

38

42

46

50

54

58

62

66

70

Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16

Index,not seasonally

adjusted

Monthly

PSI Property and Business Services

3-month average

Monthly

Source: BusinessNZ, BNZ

BNZ Research

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