Source: Radio New Zealand
The services sector recovery has come to an abrupt halt after only two months in expansion. 123RF
- Services sector slumps into contraction
- All five sub-indices retreat
- Negative comments stay elevated
- BNZ says PSI “a real disappointment”.
New Zealand’s services sector recovery has come to an abrupt halt after only two months in expansion.
The BNZ-BusinessNZ Performance of Services Index (PSI) fell by 2.7 points to 48.0 in January, below its long‑term average of 52.8.
A reading below 50 indicates the sector – which accounts for nearly three‑quarters of the economy – is contracting.
BusinessNZ’s chief executive Katherine Rich said that the service sector’s expansion had only lasted two months, and February’s result was similar to the levels of contraction seen towards the end of 2025.
All five sub‑indices fell into contraction.
Stocks/inventories recorded the deepest pullback at 46.7, followed by employment at 47.2. Activity/sales slid sharply to 47.9, and new orders/business dropped back below 50 to 49.3
The share of negative comments eased slightly to 56.4 percent in February, down from 58.7 percent in January.
Firms cited weak economic conditions, high living costs, inflation and interest rates suppressing consumer spending and demand.
BNZ’s senior economist Doug Steel said that bad weather in February may have played a part, but there was no denying that today’s PSI suggested that the economy is recovering at a slower pace than expected.
“The PSI comes as a real disappointment given that Friday’s Performance of Manufacturing Index (PMI) was relatively upbeat,” he said.
Steel said most indicators over recent months had pointed toward a slow recovery, but today’s release underlined how fragile that recovery remains.
The slow momentum, combined with uncertainty stemming from developments in the Middle East, leaves the inflation outlook “well and truly up in the air”.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
