18 May 2020

Services sector hits new lows - BNZ survey

1:44 pm on 18 May 2020

Activity in the services sector all but ground to a halt in April, with economists saying the numbers confirming that should come as no surprise.

Christmas shopping in Wellington.

Photo: RNZ / Rebekah Parsons-King

The BNZ-Business NZ Performance of Services Index fell to 25.9, which is the lowest level of activity since the survey began in 2007.

A reading below 50 points indicates contraction.

BNZ senior economist Craig Ebert said the February figure of 52.1 - indicating growth in the sector - seemed like a world ago.

"A sizeable rate of contraction is what you get when businesses are forbidden from operating, especially those with a customer-facing focus.

"Covid-19 has seen to that, with policy responses reinforcing the sudden-stop."

He said there was not a great deal of variation across service industry types, with firms large and small feeling the same impact.

"This underscores that the pain is indiscriminate and scale is no assurance of survivability."

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Cultural, Recreational & Personal was the weakest service type, with a meager 10.6 points, Finance and Insurance was the best of the bunch, with 33.3. Retail Trade was 21.6.

Similar to the manufacturing (PMI) data last week, employment within the sector did not contract as rapidly as might be expected, due to the wage subsidy keeping people employed.

Ebert said while the figure of 42.1 was not positive, it was a lot less negative than other aspects of the survey.