South Island service industries hammered post-earthquake

Central Christchurch following the February 22 earthquake. Photo / Geoff Sloan

South Island service businesses such as accommodation, restaurants, café, retail and gyms took a heavy knock in March, reflecting the inevitable impact of the February 22 Christchurch earthquake, the March Performance of Services Index from Business New Zealand shows.

The impact has been felt across the whole South Island, including the Otago and Southland, where the regional index fell to 39.5 to match Canterbury/Westland, representing a sharp contraction in activity and the first sub-40 result recorded for Canterbury.

An index score above 50 indicates growth, while under 50 means contraction.

The cultural, recreational and personal services index collapsed in March, scoring 20.8 on the PSI index, consistent with the "destruction and disruption to these types of businesses in and around central Christchurch," they survey's compiler, Bank of New Zealand, said.

Elsewhere, however, the outlook was less grim, with North Island indices remaining positive, and the national PSI seasonally adjusted index score of 50.8 just scraping into positive territory, although well down on the 56.1 scored in March last year.

In March 2010, the Canterbury/Westland PSI score was 54.4.

"Whether one sees this as a glass half full or half empty result largely boils down to personality type," said BNZ economist Craig Ebert.

The impact is hardest on the smallest firms, with those employing up to 10 people reporting an index score of just 42.1, compared with 54.6 for firms with more than 100 people, and 59.0 for firms employing between 50 and 100 staff.

While the damage to trading conditions caused by the Canterbury quakes was predictable, there was a glimmer of hope in steady employment intentions, suggesting that employers are "looking through the near-term disruptions, as best they can, to ongoing recovery underneath and ahead."

BNZ expects March quarter unemployment statistics not to reflect the impact of the latest quake, as Statistics New Zealand opted not to survey employment in Canterbury during the quarter.

However, that may "delay the pain to Q2/Q3, especially on the presumed removal of government income support and other lifelines that were brought into effect after the quake."

Conversely, robust employment intentions had shown up in several recent surveys, recruitment agencies were reportedly active, and Trade Me job ads were showing annual growth of 25 per cent.

"Such things maintain hope that the nation's unemployment rate will hold in the near term and fall from then on," Ebert said.