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The service sector took a backwards step in October after three months of expansion, according the latest BNZ Captial-Business NZ Performance of Services Index (PSI).
PSI for the month slipped from 53.2 in September back into negative territory of 49.9 in October, though it was 1.2 points higher than October last year.
A figure above 50.0 suggests the sector is expanding, and below that contracting.
Contributing to the fall was a sharp decline in two key indicators - activity/sales which fell 9.6 points to 48.4, and new orders/business, which fell six points to 52.6.
Business NZ chief executive Phil O'Reilly, who described the overall result as flat, says there were some positive signs, such as employment, which expanded for the first time in 19 months.
"The flatness in activity was also mirrored in comments by respondents, with many noticing a lull in their respective markets," says O'Reilly.
"No doubt for many, the approaching Christmas period may provide some relief, while the recently announced revised dairy payout may also provide an end of year boost for those sectors providing services in particular to rural communities."
Regionally, Canterbury/Westland recorded its highest level of expansion since December last year, while the Central region also picked up.
The northern region lost gains it had made in the last three months, falling back into contraction, while the Otago/Southland region was the poorest performer for the second month in a row.
Despite October's shuffle backwards, BNZ Capital senior economist Craig Ebert says there is a sense of stability returning to the service sector.
"We believe an improvement is beginning to emerge, such that we'll see some moderate expansion through the December quarter - in line with indications from the improvement in such things as consumer sentiment and the housing market," he says.
However, he says the improvement looks relatively weak at the
moment.
