24 Jan 2023

Events, hospitality help drive positive showing for service industry

2:41 pm on 24 January 2023
Close-up of woman holding piece of pizza and having lunch together with her family at the table

The return of tourists is ensuring a busy period for cafes and restaurants, the BNZ says. Photo: 123RF

Service sector activity slowed at the end of last year, but remained positive with accommodation services, cafes and restaurants performing well.

The BNZ-Business NZ Performance of Services Index (PSI) for December fell 1.7 points from November to 52.1, below the long-term average of 53.6.

A reading above 50 indicates the sector is generally expanding, but sales, employment and stocks fell to their lowest levels since February last year.

BNZ senior economist Craig Ebert said accommodation services, cafes and restaurants led the expansion, but there were headwinds on the horizon.

"It's been a feature of the last few months, but accommodation, cafes and restaurants have kept very busy, which is strongly positive and that relates to the tourism story," he said.

"But by far the biggest contributor was a category called cultural, recreation and personal, and that's related to some of the events that were held related to the Covid restrictions, or the restrictions that were not in effect.

"In fact, that component registered a maximum of 100, which is quite rare for any component of the PSI, so that's raging away as well.

"But on the other side, there's weakness still coming through retail and wholesale."

Retail trade posted its second successive below-50 result in December, with 47.5, which gelled with the clear fall in December's electronic card transactions, Ebert said.

Wholesale trade, transport and storage and communication were other weak spots in December's PSI.

Ebert said the latest index reflected the general economic slowdown, as consumers looked to rein in their spending.

He expected service sector activity to continue to slow in the coming months.

BusinessNZ chief executive Kirk Hope said labour shortages still plagued the sector.

"Despite the index remaining in expansion mode, the proportion of negative comments lifted and dominated for December (58.2 percent), compared with only 47.3 percent in November.

"While seasonal factors such as Christmas and holidays were discussed, the shortage of labour continues to have a strong mark on negative comments made, along with a number of businesses pointing to general uncertainty in the market."

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