Service industry stumbles, tourism at risk

Monday 18th May 2009

New Zealand’s service industry stumbled in April as domestic household spending shrank, and a reduction in international visitors weighed on the local economy.

The Bank of New Zealand – Business NZ Performance of Services Index (PSI) fell to 43.7 last month from 47.1 in March. It was the second lowest result since a record low in January of 42.7.

Activity/sales sank to 40.9, its second-lowest value, while employment dropped to 42.5 in its second-worst result. A PSI number above 50 indicates expansion while a result below 50 signifies a decline.

Tourism is “fundamental” to the strength of New Zealand’s service sector,” said Bank of New Zealand head of research Stephen Toplis.

“The headwinds that tourism currently faces are proving to be a substantial headache for the economy. Against the global backdrop “it is no surprise that visitor numbers are dropping sharply.”

Tourism weighted activity is forecast to shrink 1.7% this year according to the bank, as weak American and British economies discourage travellers from these destinations.

International arrivals tumbled 10% to 226,500 in March compared to the same period the previous year, according to government statistics.

Air New Zealand’s long-haul passenger numbers fell 12% last month with a number of cancellations on Japanese routes due to fears an influenza pandemic was sweeping the world.

Prime Minister John Key, who’s also the Tourism Minister, last week predicted a $65 million windfall from Australian tourists on the back of a marketing campaign.

The government and the national carrier each spent $2.5 million on the promotion to attract 35,000 more visitors from across the Tasman.

Toplis said the Australian economy is “faring much better than many” and the favourable exchange rate could lure tourists from New Zealand’s closest neighbour. The kiwi rose to 78.27 Australian cents from 77.84 cents on Friday in New York.

Health and community services was the only sector to show continued expansion at 51.1 in the PSI, while wholesale trade recorded its worst result at 39.3.

Businesswire.co.nz

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