Otago and Southland's close connections with Canterbury were evident in the latest Performance of Services Index (PSI) when both regions scored a low of 39.5 points in March.
The BNZ-BusinessNZ index, released yesterday meant Canterbury scored its first below-40 result. There was no survey in February because of the earthquake in Canterbury.
Otago-Southland Employers Association John Scandrett said he expected to see a fall-off in the local service sector following the earthquake.
"Back in January, when we saw a 46.3-point PSI, we were concerned about weakness across tourism, retail, and accommodation/catering sub-sectors and these concerns have been developed around the low March reading.
"Our close connections to Canterbury in the geographic, social and commercial sense are most evident and we have been unable to escape the negative impact of the Christchurch upheavals."
The local survey recorded participants' sentiment around such comments as "quake fall-out", "perfect storm" and strong "lack of demand" factors, he said.
The only slightly positive comments in the March PSI came through property services activities and those could be connected to the follow-on ramifications of the earthquake, Mr Scandrett said.
BNZ senior economist Craig Ebert said said the overall index contraction was minor, down from 51 points to 50.8.
Northern was up at 54.6 points and central was also improved at 57.5.
"While the Christchurch earthquake has obviously wrought a big dent, the PSI had enough of a buffer beforehand to avert going negative - just.
"Whether one sees this as a glass half full or half empty result largely boils down to personality type."
The PSI employment index had improved since last year and that, coupled with the manufacturing index, published last week, painted a picture of the jobs market holding up reasonably well, he said.
That suggested firms were looking through the near-term disruptions as best they could to ongoing recovery.
While perceptions of double-dip recession and the reality of the February 22 earthquake had many wondering about a blow-out in New Zealand's unemployment rate, a good number of indicators had given cause for optimism, at least in the medium term, Mr Ebert said.
