The economically important services sector is struggling to get traction. Photo: 123rf.com
- Services sector PSI falls, third consecutive month in contraction territory
- Sales fall but new orders improve
- Services sector points to soft economy recovery.
- Further RBNZ rate cuts expected.
The economically important services sector is struggling to get traction and weighing on the pace of recovery.
The BNZ-Business New Zealand Performance of Services Index (PSI) fell 0.4 points to 48.5 in April from the month before.
A reading below 50 means activity is slowing in a sector which accounts for about two-thirds of the economy and includes tourism, retail and hospitality.
"The survey says the services sector is still going backwards. 48.5 is below 50.0 which is contraction, and indeed its three months in a row the service sector has been going backwards," BNZ senior economist Doug Steel said.
The sub-indices were mostly negative compared to March. Sales were unchanged, but employment fell and deliveries slumped to their lowest level since September 2024. Only new orders bucked the trend, rising to the highest level in over a year.
The level of negative comments in the survey rose once again, citing a combination of geopolitical and economic uncertainty, the cost of living, weak consumer and business confidence, and seasonal slowdowns.
"For all the commentary around the economic recovery, the PSI is a good reminder that current conditions are extremely challenging. New Zealand's PSI remains weaker than all our key trading partners," Steel said.
He said combined with last week's manufacturing survey, a picture emerges of an economy struggling to gather forward momentum, threatening growth forecasts.
"It suggests that the central bank will continue easing. We think they'll cut by 25 basis points next week."
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