Service sector expansion picks up in February

The level of expansion in the services sector has picked up after two consecutive months of easing, according to the Bank of New Zealand - Business NZ Performance of Services Index (PSI)



The PSI for February stood at 55.6, which was 3.7 points higher than the January result. A PSI reading above 50.0 indicates that the service sector is generally expanding; and below 50.0 indicates a decline. The survey began in April 2007, with an average score of 57.3.



Business NZ chief executive Phil O’Reilly says it’s pleasing to see the February results showing some recovery from the lower levels of activity over the Christmas/holiday season.



“Comments from respondents highlighted increasing economic uncertainty and a general slowdown in activity, which is consistent with the majority of other economic indicators at this time. Inflationary pressures and current interest rate levels were also mentioned, two issues that will not ease anytime soon,” he says.



All five diffusion indices that make up the PSI showed expansion and improved on the January results. New orders/business (61.4) leapt back over the 60-mark, while stocks/inventories (51.3) returned to show positive activity after the Christmas/holiday sales period. Activity/Sales levels (56.2) also improved from its stationary position at the start of 2008 although, similar to the overall PSI result, are still below its average figure of 59.0.



Regional activity was up throughout the country, with the Otago/Southland region (61.1) recovering strongly from two consecutive months of decline to lead the February results. This was closely followed by the Canterbury/Westland region (60.2). The Northern region (52.8) result for February was almost identical to January, while the Central region (55.6) showed moderate growth.



Most service sub sectors showed consistent expansion for the second month of 2008, with seven falling within a fairly narrow band of activity. Retail trade (56.6) took the top spot for activity, followed by health & community services (55.7). The lowest result was for accommodation, cafes & restaurants (53.4), after leading the sectors in January.



Link to the February PSI

Link to the time series data