Otago and Southland service sector businesses had a tough start to the year, according to the latest BNZ Capital-Business NZ performance of services index (PSI).
The regional PSI for January fell to 40.4 points, down from 53.8 in December and slightly down from the 40.9 recorded in January last year.
A PSI reading above 50 indicates the sector is generally expanding and below 50 suggests it is declining.
Otago-Southland Employers Association chief executive Duncan Simpson said the January result probably reflected some natural drop-off after a relatively buoyant December with the hospitality sector in particular tending to drag the local index down.
"Dunedin businesses will be looking to the return of the students which, coupled with other city events, can be expected to give some sort of boost to the index."
Nationally, the PSI dropped to 42.7, down 5.3 points from December and 9.2 points from January last year.
January's result was the lowest since the survey began in April 2007. The average PSI value for 2008 was 49.1 and for 2007 was 58.1.
Mr Simpson said the first month of 2009 had unsurprisingly shown another fall in activity across the country's service sector, but the level of the drop was severe.
"Contraction over the last nine months has been moderate rather than significant, but January's decline, even taking into account seasonal factors, now puts us on a level with other countries, including the US, where the JPMorgan Global Services Index currently stands at 43."
Results from the various service sectors were mainly negative for January with property and business services the only one to improve slightly.
All sizes of firms experienced contraction in January with all but medium to large firms (50-100 employees) displaying their lowest value.
Mr Simpson said the significant fall in overall activity was mirrored by the proportion of negative comments from respondents in January rising to 63.6% from 58.9% in December and 59.2% in November.
