The South Island services sector index slumped sharply last month, and has now recorded a sluggish or poor performance for six of the last seven months.
The BNZ-BusinessNZ Performance of Service Index (PSI) for the two North Island regions expanded in October, but Otago-Southland, at 45.4, and Canterbury-Westland, 45, both contracted.
Otago-Southland slipped sharply from 55.8 points in September, while Northern at 55.3 last month, led the country for the second consecutive month. Central on 51.5 for October, was consistent with September.
Nationally, the PSI for October was 52, down 2.9 points from September, but was the highest October result since 2007.
An index reading above 50 indicates expansion and below indicates contraction.
Otago-Southland Employers Association chief executive John Scandrett was disappointed at the result, but said he expected the index to be volatile.
"That stability has yet to be realised, and when we see ongoing negative feedback around issues such as a lack of demand and continuing recessionary impact factors, we know there is some distance to travel to claw away from the current volatility in this sector."
An analysis of the figures showed the South Island was lagging in new businesses, stock levels and supplier deliveries, he said, which indicated volatility could continue for some time.
BNZ's head of research, Stephen Toplis, said the South Island decline was understandable given the Canterbury earthquake, the spring storms, the rise in GST and continued softness in the housing sector.
Nationally, four of the five indices expanded last month: new orders-businesses 53.1, activity-sales 54.9, employment 49.8, stocks-inventories 50.1, supplier deliveries 50.5.
Wholesale trade (48) and retail trade (49.2) both declined after expanding in September, while property and business (55.9) and health and community services (54.1) both expanded, but at a lower rate than last month.
