Sun shines on service sector

The service sector continued to show a pick-up in expansion, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for February was 55.5.  This was up 2.7 points, following a 1.1 increase in January (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining).  Compared to previous February results, the 2013 value was the highest since the survey began in 2007.

BusinessNZ chief executive Phil O’Reilly said that the February result was pleasing to see after a pick-up in activity at the start of the year.

“Expansion was generally across the board, with the main diffusion indices all showing stronger growth.  In addition, the proportion of positive comments from respondents (64.8%) increased markedly from January (52.7%), with the current long fine period throughout the country providing the largest proportion of comments on increased business activity.

“There is no doubt that the current dry weather is having an adverse effect on certain parts of the economy, as shown by the increasing number of drought declared regions.  Therefore, it is important that other sectors of the economy are able to maximise conditions to keep the economy moving.”  

BNZ senior economist Craig Ebert said, “This latest PSI result continues to stake a claim on solid economic recovery and, together with the PMI, is consistent with firm GDP growth into the early part of 2013. With the economy facing many challenges such as drought and the high exchange rate, this is key and timely information. The combined PMI and PSI result gives some confidence we’re right to remain positive, overall.”

The seasonally adjusted BNZ - BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for February saw both options for measuring the PCI increase in expansion for the second consecutive month.  The GDP-Weighted Index (55.5) increased 2.2 points from January, while the Free-Weighted Index (55.9) rose 1.7 points over the same period.  This was the highest result for the GDP measure since October 2012, and the highest for the Free-Weighted measure since May 2012.

All five main sub-indices were in expansion during February, compared with two last month.  Again, leading the way was new orders/business (59.6), while activity/sales (55.4) also experienced an increase from January.  Employment (52.5) picked up 2.4 points from the previous month, and its highest result since April 2012.  Stocks/inventories (53.3) also produced its strongest value since April 2012, while supplier deliveries (55.8) increased significantly, reaching its highest value since June 2007.

All activity by region was in expansion mode during February.  In the North Island, the Northern region (56.5) picked up 5.6 points after two consecutive months of slipping expansion levels.  However, the Central region (54.5) produced an all but identical result from January.  In the South Island, the Canterbury/Westland region (59.1) experienced its third consecutive increase in activity to record expansion for the current month, while the Otago/Southland region (61.9) bounced back after a dip in January.

Link to the February PSI & PCI
Link to PSI time series data
Link to PCI time series data