Building momentum

The service sector showed further momentum with a healthy February result, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for February was 55.5. This was up 1.7 points from January and up 4.4 points from December. A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining. The 2012 February result was also the highest value recorded for that month since the survey began in 2007.

BusinessNZ chief executive Phil O'Reilly said that like its sister survey, the PMI, the result for the PSI in February provides some encouraging signs for the overall economy.

"The improvement in the PSI comes off the back of further upwards momentum in both activity/sales and new orders/business. Also, when taking into account the January result, the first two months of 2012 have showed more life than we have experienced for some time.

"It was also pleasing to see the proportion of positive comments going from under half in January to a strong net positive (56.1%) for February. The comments themselves were fairly generic, with the main focus being on a sense of recovery after Xmas."

BNZ senior economist Craig Ebert said, "February's PSI provided fuel to the fire of last week's PMI. Combined, they point to more than just ongoing economic recovery but, in all probability, a quickening pace of it."

The seasonally adjusted BNZ - BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for February showed the two options for measuring the PCI again significantly improving from the previous month. The GDP-Weighted Index (55.8) rose 2.2 points from January, while the Free-Weighted Index (57.2) rose 4.8 points. The February results for both options were the highest monthly values since March 2010.

All five sub-indices showed expansion in February. This was again led by new orders/business (60.5), with a result the same as November 2011. This was followed by activity/sales (58.1), which increased 4.3 points from January. Employment (51.8) dipped from January but was still in expansionary mode. Supplier deliveries (52.3) increased for the second consecutive month, while stocks/inventories (51.2) moved back into expansion after a figure of 47.0 in January.

Unadjusted activity was expansionary across the country. Both the Northern (55.3) and Central (58.8) regions recovered from their dips in January to post healthy levels of expansion. The Canterbury/Westland region (64.1) was largely unchanged from January, while the Otago/Southland (57.7) region eased its expansionary levels from the previous month.