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

The PSI for October was 48.7 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Although this was 0.4 points higher than September, the sector remains entrenched in contraction, which has now been the case for 20 consecutive months. The October result was also still well below the average of 52.8 over the history of the survey.

BusinessNZ’s CEO, Katherine Rich said that while the level of activity in the sector has risen for the second consecutive month, the fact that none of the sub-index results managed to get above 50.0 during October shows it is still tough times for service-based businesses. For the sub-index results, Activity/Sales (48.9) recorded its highest value since January 2025, although New Orders/Business (49.5) slipped slightly from September. In addition, Employment (48.8) rose 0.9 points from September, recording its highest value since March 2025.

The proportion of negative comments for October (54.1%) was down from September (58.0%) and August (59.6%). Negative comments received show the services sector reporting weak demand and reduced customer spending due to the economic downturn, cost-of-living pressures, and low confidence. Rising operating costs, delays, competition, and project cancellations are further reducing sales, slowing activity, and creating cashflow challenges.

BNZ’s Senior Economist Doug Steel said that “if one was trying to find any positive traces in a still broadly weak sector, the activity/sales index rose to its best outcome since January this year and its second-best month since February last year. But 48.9 is not strong”.