According to the BNZ – BusinessNZ Performance of Services Index (PSI), the services sector in New Zealand contracted again in May.
The PSI for May was 47.5 (where a reading above 50.0 indicates the sector is generally expanding, and a reading below 50.0 indicates the sector is in contraction). The PSI reading for April was 48.7.
BusinessNZ’s CEO, Katherine Rich said “It is frustrating to see the services struggle, but it is difficult to see how the sector’s fortunes will turn around quickly. The industries within the sector that were weakest in May were those, like Cafes & restaurants and Recreational & personal services, that rely heavily on discretionary expenditure by consumers. People are still very wary of spending unless it cannot be avoided.”
Just over two-thirds of the respondents’ comments about the influences on their business environment were negative, about the same as in April. The comments frequently related to rising costs, especially for fuel, and weak demand linked to lack of consumer confidence.
All five of the PSI sub-indices were below 50.0, with the weakest being the sub-index for Activity levels and sales, which is a mark of how subdued the sector is currently. The least weak was for Supplier deliveries, which at least means that it should be possible for the sector to respond quickly to any pick-up in demand.
BNZ Senior Economist, Doug Steel said “The PSI has oscillated in contractionary territory over recent months, dipping to 47.5 in May from 48.7 in April. It indicates a sector struggling to get its head back above water.”
