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The reintroduction of Covid-19 restrictions were felt as the services sector in the South had a significant drop in August activity.
The performances of service index (PSI) released yesterday had the Otago and Southland services sector at 34.2 points — down from a year high in July of 63.4.
A PSI reading above 50 indicates that services are generally expanding; below 50 they are declining.
The regional breakdown in categories have all categories in decline, with supplier deliveries at 40 and employment levels and orders/new business less than 40.
The PSI is released by the Otago Southland Employers Association.
"As soon as Auckland moved into Alert Level 3 on August 12, and the rest of New Zealand moved to Alert Level 2, our service sector declined significantly," association chief executive Virginia Nicholls said.
"This has bruised economic confidence and businesses are far more cautious with their commitments, including staffing levels, stock, and other expenditure."
Hospitality, accommodation and tourism operators struggled with cancellations after the change in alert levels.
"Events are vital in our recovery, and we saw the positive effect of the University of Otago and Otago Polytechnic open day, which successfully brought 6000 students on to our campuses in early August," Mrs Nicholls said.
"Later in the month we saw the devastating impact of the cancellation the University of Otago August graduations and the Highlanders game played without an audience."
Two previous Highlanders home games had led to the two biggest spending nights for bars and clubs this year, Westpac Bank data showed.
"It is not easy running some events with 100 or less participants and this can make some events unprofitable."
The lack of international students is having a significant impact on tertiary providers and schools.
There were only 27% positive comments in the index, "which is a significant reduction on last month".
The second extension of the wage subsidy had helped but now it was ending some service organisations would struggle, Mrs Nicholls said.