Prolonged recession in Services sector to last through Christmas

The BNZ-Business NZ Performance of Services Index (PSI) for September fell to 46.9 from 47.9 in August, indicating that the downturn in the sector may last through the Christmas quarter. September was the sixth consecutive month in which the New Zealand services sector contracted. The figure of 46.9 is the second lowest since the survey began.  A figure over 50 indicates expansion, under 50 indicates contraction. "The main index values (of the PSI) showed there is likely to be more of the same in terms of a downturn in activity for some months to come," Business NZ chief executive Phil O'Reilly said. "Activity/sales for the last two months have shown fairly poor results, and nowhere near activity during the same period last year. In addition, new orders/business slipped into slight contraction for the first time. This does not bode well for activity during the last quarter of 2008, which for many service sectors is the prime period for sales leading into Christmas," O'Reilly said. Of the five diffusion indices that make up the PSI, four showed contraction in September. 'Activity/sales' was 43.9, up from 41.2 in August but still contracting. 'Employment' (45.8) contracted for the seventh consecutive month after falling from 48.1 in August. 'New orders/business' (49.4) contracted for the first time since the survey began, and 'Supplier deliveries' fell from 51.3 in August to 45.6 in September. Regionally, the Central region (52.7) remained the strongest of the four regions. Canterbury/Westland (50.9) grew after contraction in August (47.7). The Northern region slipped to its second lowest result of 46.5 while Otago/Southland continued to flounder with a contraction figure of 37 in September.