The services sector in New Zealand fell back into contraction during February, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for February was 48.0 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was 2.7 points lower than January and below the average of 52.8 over the history of the survey.

BusinessNZ’s CEO, Katherine Rich said that the sector’s rebound into expansion only lasted two months, with a February result similar to levels of contraction seen towards the end of 2025. All main sub-index results were in contraction, with Stocks/Inventories (46.7) displaying the largest level of contraction, followed by Employment (47.2)

The proportion of negative comments for February was 56.4%, which was down from January (58.7%) but up from December (50.4%). Negative comments received outlined weak economic conditions, high living costs, inflation and interest rates as reducing consumer spending and demand for services. Seasonal holiday effects, low confidence, staffing constraints, rising costs and broader uncertainty also contributed to softer activity.

BNZ’s Senior Economist Doug Steel said that “alas, today’s PSI suggests the economy is recovering at a slower pace than we might have expected. The PSI comes as a real disappointment given that Friday’s Performance of Manufacturing Index (PMI) was relatively upbeat”.