Chris Small: ABC Business Sales CEO on the service sector's worst performance since May

New data shows the service sector has now dipped in activity for six months in a row. 

The most recent PSI recorded performance at its lowest since May, at 46.9.  

For growth, it needs to sit at 50 or above. 

ABC Business Sales CEO Chris Small told Heather du Plessis-Allan the results were a surprise. 

He says the data had suggested the low point would be during Winter. 

The sector is blaming the weak economic environment for the downturn, Small saying that in comparison, the retail sector saw a boost around Black Friday. 

He says this shows things are turning around and services are just the lagging factor. 

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Episode Transcript

Speaker 1 (00:09):
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Speaker 2 (00:16):
Got some sober reading for the services sector New b
and Z Business New Zealand data shows the services index
has slipped to forty six point nine. That's for November.
Anything below fifty means it's contracting. This is at its
worst level in six months. And Chris Small is ABC
Business our CEO and with us morning, Chris.

Speaker 3 (00:33):
Well, here there you go, very.

Speaker 2 (00:35):
Well, this is a bit of a surprise. It is
a surprise to you.

Speaker 3 (00:38):
Yeah, it really is a surprise. I thought that, you know,
the worst of it been seen in winter and order
new data that we've seen suggested that winter was our
low point and then this sort of just banned us
yesterday all the day before. I think it was so
slightly surprising. But there are I think one thing that's
not covered here is the regional landscape of New Zealand,
and I think if you looked at the South Island

(00:58):
numbers in isolation, you probably see there going quite well.
And then if you look at Auckland and Wellington, which
sort of other service hubs, they aren't going so well.
And obviously the south ID is driven by that. You know,
the primary and egre sector which is really flying and
helping that part in is Yelland so.

Speaker 2 (01:15):
The PSI for accommodation cafes and restaurants looks if you
look at it, okay at fifty eight point eight, but
actually that's still below the average of sixty one point eight.
Now what do you put that down to. Is that
simply we don't have the discretionary cash we used.

Speaker 3 (01:27):
To have, But that's certainly what it's suggesting. But you know,
we've got a number of clients in that sector, and
a number of them are actually reporting very strong, really
strong run into Christmases. So I think in that sector
in particular, and you probably not yourself, heether, when you're
walking down points right, there's some there's some operators who
are really strong and going well, and then there's some

(01:48):
that are answers. There's real winners and losers in that
sector and probably not too many in the middle. So
there's certainly many operators are going really well, but if
you're not producing something that customers want, you really are struggling.
So that's more of a winners and losers rather than
a consistent. Everyone's down. Yeah.

Speaker 2 (02:03):
Now now the retail number strongest in eight years, down
to Black Friday.

Speaker 3 (02:09):
Look a little bit of that. But also think those
lower interest rates are starting to kick in. And I
think when you think about your own spending, as soon
as you start seeing a little bit of extra money
in your bank account each week, you're probably going to
hit the shops first, and then you might hit your
services second. I think that's a bit of a leading
indicator that actually, you know what, we have hit the
bottom and things are slowly turned around, and services is

(02:29):
just going to be the lagging factor, I think.

Speaker 2 (02:31):
Does I mean some people have looked at these numbers
I've seen already and they've gone, jees, I don't know
what this is for the outlook for economic recovery next year?
Are you doing that as well?

Speaker 3 (02:40):
Look when you look at there's one number that stands
out there. So the strongest number within that report was
the new order number. So that's that's the most forward
looking indicator you've got, and that's that's the heart. That's
a forty nine percent, So it's still it's only just
below fifty, which, as you rightly said, is the sort
of midpoint and anything above that expansion. So I think

(03:01):
with all our customers that we talk to, whether it
be childcare, gyms, hospitality, they're all they're all thinking that
they've hit the worst of it and things are starting
to be on the improve. In twenty twenty six is
going to be a far better year. So I think
if you really read them between the numbers, the most
forward looking indicator is the strongest, and regional wise used
to be no workland and warring from the struggling, but

(03:22):
they will come back and they'll follow the lead from
out from the southoldto it, sort of benefiting from the
primary and EG receptor is the way we look at it.

Speaker 2 (03:29):
Oh, that's fantastic news.

Speaker 3 (03:30):
Chris.

Speaker 2 (03:30):
You look after yourself. It's always good to talk to you.
Chris Small, ABC Business Sales CEO.

Speaker 1 (03:35):
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