Despite experiencing an improvement in activity levels for February, the service sector remains in contraction, according to the BNZ Capital – BusinessNZ Performance of Services Index (PSI).

The PSI for February stood at 46.3, which was up 3.6 points from January, but still 9.3 points down from February 2008.  A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining. The average PSI value for 2007 was 58.1, while for 2008 it was 49.1.

BusinessNZ chief executive Phil O’Reilly said that although the pick-up for the current month from its lowest ever value in January was positive, the sector remains firmly entrenched in contraction. The February result was also the third lowest since the survey began.

“Hardest hit has been the retail sector, which has now slipped to its lowest activity level. Also, the pain felt by those in the service sector is now nationwide, with all four regions that New Zealand is broken into experiencing a drop in activity for the first time. Offshore results for the sector shows continued pain, with activity and new orders still sluggish.

All five diffusion indices that make up the PSI continued to exhibit contraction during February, although all experienced some level of improvement from January. Activity/sales (42.9) rose above the 40 point mark, while employment (44.9) rose 1.4 points. New orders/business (49.8) returned to the same value as December, while stocks/inventories (48.3) showed a similar uplift. Deliveries (47.2) rose 3 points, although still showing contraction. In comparison with February 2008, almost all sub-indices were considerably lower.

For the first time, activity by region was negative throughout the whole country, as the Central region (46.9) experienced a sub-50 result for only the second time. In contrast, the Northern region (45.3) improved from its sub-40 result in January to return to activity levels seen in December. In the South Island, the Canterbury/Westland region (48.9) was relatively unchanged from January, while the Otago/Southland region (48.0) improved from a significant drop in activity in January.

Click here to view the February PSI & PCI
Click here to view the PSI time series data
Click here to view the PCI time series data

For media comment: Kathryn Asare, ph 04 496 6556 or 021 555 744

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