New Zealand’s services sector experienced its third consecutive drop in activity levels, according to the BNZ – BusinessNZ Performance of Services Index (PSI).
The PSI for August was 47.1 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was down 0.9 points from July, and almost at the level seen back in January 2022. It was also well below the long-term average of 53.5 for the survey.
BusinessNZ chief executive Kirk Hope said that the August result showed little in the way of a road to recovery. While Employment (50.9) went back into slight expansion, Activity/Sales (43.4) remained in strong contraction and New Orders/Business (47.3) was in contraction for a second consecutive month. In addition, Supplier Deliveries (49.2) went into contraction for the first time since November 2022.
“The proportion of negative comments stood at 63.9% in August, compared to 67% in July and 55.6% in June. Overall, negative comments received were strongly dominated by uncertainty regarding the upcoming General Election, as well as continued adverse economic conditions”.
BNZ Senior Economist Doug Steel said that “the latest PCI readings suggest any bounce through the Q2 GDP figures will be short lived and are consistent with economic contraction returning. In this sense, the PMI and PSI results are more consistent with the RBNZ forecast of a return to recession than the Treasury’s latest forecasts of moderate growth ahead”.
