According to the BNZ – BusinessNZ Performance of Services Index (PSI), New Zealand’s services sector held onto its expansion in July, following June’s return to growth.
The PSI for July was 50.6 (where a reading above 50.0 indicates the sector is generally expanding, and a reading below 50.0 indicates the sector is in contraction). This was down slightly from 50.9 in June, but still above 48.1 in May. July marks a second consecutive month above the breakeven mark.
BusinessNZ’s CEO, Katherine Rich said “It’s encouraging to see the PSI hold above 50.0 for a second month running, even if the pace has eased slightly from June. Employment remains the sector’s soft spot, sitting at 48.5 alongside Supplier Deliveries, which tells us firms are still cautious about committing to new hires. Until consumer confidence firms up further, this recovery will likely stay modest rather than becoming the stronger bounce we’ve seen in manufacturing.”
The respondent comments showed that cost of living pressures, fuel and petrol prices, and rising interest rates remain front of mind for many, with a number also citing uncertainty ahead of the election. Sentiment was notably softer than in manufacturing, with 64% of comments negative.
New Orders/Business was the strongest sub-index, at 52.6, followed by Stocks/Inventories at 51.6 and Activity/Sales at 50.5. Employment and Supplier Deliveries were the weakest, both at 48.5, a reminder that the recovery remains narrowly based.
BNZ Senior Economist, Doug Steel said “The PSI was 50.6 in July. Not far from June’s 50.9 outcome but still above the breakeven 50 mark for the second consecutive month. The positive take is that this represents progress with the past two months having shown better readings than for most of the past three years. Moreover, the activity/sales index rose above 50 for the first time in six months”.
