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Pause for thought

Pause for thought

While continuing to expand, activity in the services sector lost some impetus during February, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for February was 53.1. This was down 4.7 points from January, and similar to levels of expansion last seen in August 2013 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Over the last 6 months, the PSI has averaged 56.5.

BusinessNZ chief executive Phil O’Reilly said that although there was a more moderate level of expansion for February, the sector remains in a healthy position.

“The proportion of positive comments was similar to last month, with two-thirds of respondents indicating their major influence on business activity assisted their operations during February. Also, the key indicators of production, new orders and employment are still at solid levels of expansion.

“It is also useful to point out that the February results here are in good company with other countries, as growth of global services sector slowed, with a number of countries slipping back into contraction territory.”

BNZ economist Doug Steel said the February PSI results looked a bit soft at face value, but only when lined up against the exceptional strength from January. “Looking through the monthly wiggles, growth trends in the service sector appear strong in early 2014.”

Like last month, three of the five main sub-indices were in expansion during February. New orders/business (56.1) recorded its first sub-60 point value since August 2013, while activity/sales (55.3) also recorded a sub-60 value after reaching 62.9 in January. Employment (53.6) dropped 1.4 points from January, although still showed encouraging growth. Stocks/inventories (48.4) improved 2.5 points from January, while supplier deliveries (49.7) rose 2 points.

Activity was positive across most of the country in February. In the North Island, the Northern region (57.7) displayed similar levels of activity compared with both December and January, while the Central region (59.7) recovered from a lacklustre January to come close to reaching the 60-point mark. In the South Island, the Canterbury/Westland region (43.4) again fell back into contraction, while the Otago/Southland region (54.0) recorded a lower level of expansion.

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 at a lower level of expansion compared with recent months. The GDP-Weighted Index (53.5) decreased 4.1 points from January, while the Free-Weighted Index (55.3) fell 1.9 points.

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


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