New Zealand's services sector experienced its fourteenth consecutive monthly decline in activity in May, although the rate of decline slowed from April, the BNZ Capital - Business NZ Performance of Services Index (PSI showed).

The continued contraction in New Zealand's services industry is a leading factor for negative GDP forecasts from economists and analysts for 2009. By broad industry group, service industries account for around two-thirds of New Zealand's GDP. The economy is expected by many to remain in recession through 2009 before a recovery begins in 2010.

The May PSI was 46.2, compared to April's dip down to 43.7. A value above 50 indicates expansion in activity in the sector, while a value below 50 indicates contraction.

The property and business services indicator showed expansion in May (54.6), its first since October 2008. Accomodation, cafe and restaurant activity slumped to its lowest ever result (42.9), as did retail trade (43.5).

BNZ economist Craig Ebert said that that the demise in vehicle retailing over the last year had led to contraction in service industries surrounding the vehicle retailing industry, such as wholesale distribution and repair services.

The employment component of the PSI remained in line with expectations of rising unemployment in the economy overall. It spent its fifteenth month in contraction, although May was its slowest monthly rate of decline this year, with 46.3, up from a record low of 42.5 in April.

The contraction in 'new orders/business' slowed in May, sitting just below a no-change level (49.7). Supplier deliveries fell slightly to 44.7, while the fall 'activity/sales' slowed slightly to 43.9. Stocks and inventories also improved to 44.7 from its April low of 42.6.

The pace of contraction slowed in the Northern region of the country (from 42.8 in April to 47.4 in May), as well in Canterbury/Westland (43.1 to 43.7). It increased slightly in the central parts of the country (48.8 to 47.2) and increased more significantly in Otago/Southland (44.8 to 37.0).