Services sector still expanding – but no thanks to RWC

If there is an economic spin-off from the Rugby World Cup, the country’s services sector is yet to feel it.

New Zealand’s services sector – which includes the vital tourism industry – remains carefully upbeat according to the monthly Business New Zealand/Bank of New Zealand performance of services index (PSI).

The latest survey shows a small fall, margin-of-error fall for September, with the index figure dropping 0.6% but still at 53.2 (any number above 50 is expansionary).

But the index shows no real “bounce” in economic activity from the Rugby World Cup.

The good news about the latest data is that it is the third consecutive month of expansion, said Business New Zealand chief executive Phil O’Reilly.

“However, while Rugby World Cup games throughout the country over September have brought some businesses additional sales, others have lost out through consumers diverting spending from normal activities.”

Bank of New Zealand economist Doug Steel said a combination of factors made the latest data “strange” and difficult to read.

“The Rugby World Cup, the change in school holiday timing, Christchurch earthquakes and world growth fears are just some of the influences on the services sector over recent times. The combination of factors has led to some unusual results in the details, like a softening in sales growth, yet robust new orders and a lift in employment.”

Migration figures due out on Friday should show the impact of the added numbers – probably about 50,000 people above the normal trend, he said.

“Things seem on track to hit pre-tournament estimates of around 95,000 visitors all up – maybe even a few more.”

But that does not seem to have flowed into the tills of the local services sector.

“To date, if there has been a massive visitor spend up, it seems to have been offset by weaker domestic spending. For example, last week’s overall electronic card transactions data for September only posted a modest rise from August.

“In fact, of the many respondents who noted the event as an influence on their business in September, negative comments outweighed positive comments by a ratio of about 2 to 1.”

The services sector covers wholesale trade; property, business finance and insurance; communications, transport and storage;  cultural and recrecational services; health and comunity services;  accomodation, cafes and transport; and retail trade.

The survey also has a strong forward-looking aspect in that as well as looking at recent activity it also focuses on employment and new orders (see graph).

PSI by Industry (March 2011)