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Releasing the Otago-Southland BNZ-BusinessNZ Performance in Services Index results yesterday, Otago-Southland Employers Association chief executive Virginia Nicholls said election uncertainty affected the sector.
Growth in construction and hospitality had outstripped the local labour supply, creating jobs for many migrants.
"This is also occurring in rural and provincial areas where local labour supply cannot meet the demand for farm work."
Suppliers to the hospital industry had been hard-hit. Retailers were reporting slower sales than normal during October.
Overall activity in the region’s services sector in October came in at 62.1 points, continuing recent expansion.
The regional index was 55.8 in August and 58.8 in September. The last time the index was above 60 points was in January, when it was 64.1.
Mrs Nicholls said there were indications of a positive tourist season ahead.
In the regional breakdown, all categories were positive. Employment levels and activity/sales were at 63.6, supplier deliveries were 62.5, stocks/inventories 61.1, and orders/new business 59.1.
Only Business Central, which includes Wellington, was ahead of Otago-Southland on the regional results at 62.8. The Canterbury-Westland Employers Chamber of Commerce was on 48.4 and the Northern EMA was 52.5. A reading above 50 indicates expansion and below 50, retraction.
The national index was 55.6 points, 0.3 points lower than September.
BusinessNZ chief executive Kirk Hope said that was slightly off the 56-58 level generally experienced in recent years.
"Despite overall expansion not being quite in the same league as recent years, the proportion of positive comments for October, 67.6%, experienced a noticeable lift from September on 56.6%.
"Many outlined conditions as business as usual. Also, a number of negative comments continued to revolve around general election uncertainty."
BNZ senior economist Doug Steel said the results were robust, given the uncertainty surrounding the election, coalition negotiations, and government formation over the period.
It was a similar story for the manufacturing sector.
"It is a positive start for economic growth in the final quarter of the year."
The one not-so-strong spot for October’s index was the employment index which slowed to 51.2 from 53.7 in September, he said.
More broadly, demand side indicators, such as sales and new orders, remained robust while the supply side indicators such as employment and inventories eased.
"It may represent productivity gains. Or it may be reflecting some building up of excess demand. Whichever it is, it bears thinking about."