New Zealand’s services sector remains in an ongoing period of contraction, according to the BNZ – BusinessNZ Performance of Services Index (PSI).
The PSI for August was 47.5 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was 1.4 points lower than July, and well below the average of 52.9 over the history of the survey. The sector has now been in ongoing contraction for 18 months.
BusinessNZ’s CEO, Katherine Rich said that the sector has now endured tough times for a year and a half, representing a very difficult period for many. For the sub-index results, both Activity/Sales (46.2) and New Orders/Business (47.8) slipped from July. Employment (48.3) did show a higher value than July, although still in long-term contraction.
The proportion of negative comments for August (59.6%) was up on July (58.5%) but down from June (66.2%). Service sector businesses reported widespread pressures from inflation, high interest rates, cost-of-living impacts, and weak consumer confidence, all contributing to reduced demand and spending. Other concerns included seasonal slowdowns, rising operating costs, supply chain disruptions, and government policy uncertainty.
BNZ’s Senior Economist Doug Steel said that “across the economy, we still believe the general signs of a turning point are there. However, there is a very real risk any ensuing bounce takes longer than currently expected”.
