Activity in the services sector has plummeted during the lockdown, as sales, new orders and deliveries ground to a halt.
Sales activity, supplier deliveries, new orders and stock inventories were all in deep contraction over the past month. Photo: RNZ / Dom Thomas
The BNZ-Businesss New Zealand Performance of Services Index (PSI) for August fell 20.3 points to 35.6, down from 55.9 in July.
A reading below 50 indicates the sector is in contraction, while anything above signals the industry is expanding.
“While the August result wasn’t quite as bad as the 26.0 it plunged to in April 2020, the September 2021 result might be the better marker as the first half of August’s trading would have been solid, if July’s PSI result of 55.9 was any lead,” BNZ senior economist Craig Ebert said.
Sales activity, supplier deliveries, new orders and stock inventories were all in deep contraction over the past month.
“Employment [at 49.2], however, has held up relatively better, thus far,” Ebert said.
He said both the recent data from the PMI and the PSI provide a warning that GDP for the September quarter could mirror the 10 percent contraction recorded in the June quarter last year.
Ebert said an immediate post lockdown rebound was not guaranteed, as it took 9 to 12 months for both the services and manufacturing industries to returned to sustained expansion from strict Covid-19 restrictions in April.
“So, we should likewise be wary of assuming a full and immediate rebound in GDP post Q3,” he said.
All regions across the country recorded a substantial dip in activity from the services sector, with Otago/Southland the worst performing at just 10.
Ebert said this was an indication of the region’s reliance on visitors from Auckland.
Services that rely on face to face interactions suffered the most during the lockdown, such as the hospitality and cultural/recration businesses.
However, finance and insurance was the only sector in expansion.
“This alludes to the disparity between those able to keep operating, via technology, without the necessity of face to face contact,” Ebert said.
