Source: Radio New Zealand
BusinessNZ chief executive Katherine Rich said the services sector was clearly feeling the effects of the conflict in Iran. 123RF
- Services sector slump deepens
- All five sub-indices in retreat
- Negative comments leap higher
- BNZ says PSI “so poor, economy could soon be contracting”
New Zealand’s services sector has retreated for the third month in a row.
The BNZ-BusinessNZ Performance of Services Index (PSI) fell 1.6 points to 46.0 in March, well 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 chief executive Katherine Rich said the services sector was clearly feeling the effects of the conflict in Iran.
“The industries that deal mainly in discretionary spending – accommodation, cafes and restaurants, and cultural, recreational and personal services – have been especially impacted, and this is likely to reflect a lack of consumer confidence,” she said.
All five of the index’s sub‑indices were also in contraction.
Activity and sales were the weakest, sliding sharply to 44.6, followed by new orders and business at 45.7.
Stocks and inventories fell to 46.2, employment to 46.4, and supplier deliveries to 47.3.
The mood in the sector was reflected by the share of negative comments, which jumped from 56.4 percent in February, to 69.1 percent in March.
Unsurprisingly, many of the comments cited the effects of the Middle East conflict.
BNZ head of research Stephen Toplis said that, in the wake of the report, there was unlikely to be any real improvement in the labour market in the year ahead, and it was hard to imagine conditions improving quickly for many industries in the services sector.
Toplis said the PSI reading was so poor that the combined Performance of Manufacturing/Services (PMI/PSI) indicator was suggesting the economy could soon be contracting.
“While we are not forecasting a recession, these data support our recent decision to significantly downgrade our growth expectations for 2026.”
He described today’s PSI as “a dose of reality”, after Friday’s Manufacturing Index was surprisingly strong at 53.2.
“Some of this undoubtedly represents some initial fallout from the energy price shock, which we fear will grow in impact through April,” he said.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
