The services sector in New Zealand remains mired in contraction, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for September was 48.3 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). While this was 0.7 points higher than August, the sector has now been in ongoing contraction for 19 consecutive months. The September result was also still well below the average of 52.9 over the history of the survey.

BusinessNZ’s CEO, Katherine Rich said that it was a case of a different month but the same story for the sector. For the sub-index results, Activity/Sales (47.8) and New Orders/Business (49.6) did pick up from August, but still remained in contraction. Employment (47.8) experienced increased contraction, while Stocks (50.6) was the only sub-index to show expansion during September.

The proportion of negative comments for September (58.0%) was down on August (59.6%) and July (58.5%). Negative comments received show that the services sector continues to struggle under weak economic conditions, with low consumer confidence, reduced discretionary spending, and high living costs curbing demand. Businesses report falling sales, fewer new contracts, and cautious clients delaying projects amid rising costs and ongoing uncertainty about the broader economy.

BNZ’s Senior Economist Doug Steel said that “in isolation, the combined PMI/PSI activity indicator warns of economic growth struggling to gain traction”.