NZ services sector returns to growth as PSI hits 50.6 in June
June’s move back above the 50.0 breakeven line offers the first tangible sign that New Zealand’s services sector, which makes up the bulk of the economy, is stabilising after a prolonged soft patch, and combined with the reported surge in the manufacturing index it strengthens the case for a pickup in headline GDP growth toward around 2.0%. The narrow breadth of the improvement, with only New Orders and Deliveries clearly in expansion while Employment lags at 48.8, suggests the recovery is fragile and vulnerable to any renewed weakening in household spending. Persistent softness in discretionary-exposed segments such as hospitality and personal services points to still-cautious consumer behaviour, meaning the sustainability of the rebound will hinge heavily on cost-of-living pressures easing and confidence rebuilding from here.
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New Zealand’s services sector edges back into growth, but the recovery is still narrow and fragile.
Summary:
- The BNZ-BusinessNZ Performance of Services Index rose to 50.6 in June, up from 48.0 in May and 48.9 in April, marking the first reading above the 50.0 breakeven mark since January 2026, according to BusinessNZ.
- BusinessNZ chief executive Katherine Rich described the move above 50.0 as heartening but said the recovery is tentative rather than a strong bounce, noting it was more modest than the improvement seen in this month’s Performance of Manufacturing Index.
- Rich said the sector segments most exposed to discretionary spending, including hospitality and personal services, remain under the most pressure as households continue prioritising essentials such as fuel and food.
- New Orders was the strongest sub-index at 53.0, followed by Deliveries moving into expansion at 51.2, while Stocks/Inventories, Activity/Sales and Employment all remained below 50.0, according to BusinessNZ data.
- Employment was the weakest sub-index at 48.8, underscoring that the return to overall growth remains narrowly based, per BusinessNZ.
- BNZ head of research Stephen Toplis said the improvement, alongside the surge in the manufacturing index, suggests economic growth should soon climb to around 2.0%, describing this as confirmation that the pre-oil-shock growth trend is resuming.
New Zealand’s services sector returned to expansion in June after a prolonged period of contraction, according to the BNZ-BusinessNZ Performance of Services Index, which rose to 50.6 from 48.0 in May and 48.9 in April. The reading marks the first time the index has moved back above the 50.0 breakeven mark, which separates expansion from contraction, since January 2026.
BusinessNZ chief executive Katherine Rich said it was heartening to see the index edge back above breakeven after such a lengthy stretch of contraction, but characterised the improvement as tentative rather than a strong rebound, contrasting it with the more pronounced gain recorded this month in the Performance of Manufacturing Index. She said the parts of the services sector under the most pressure remain those most exposed to discretionary household spending, such as hospitality and personal services, where consumers are still directing their money toward essentials including fuel and food rather than optional purchases.
Within the index, New Orders was the strongest performing sub-index at 53.0, while Deliveries also moved into expansion territory at 51.2. The remaining three sub-indices stayed just below the breakeven line, with Stocks/Inventories at 49.9, Activity/Sales at 49.3 and Employment, the weakest of the group, at 48.8. Rich noted that this pattern serves as a reminder that the sector’s return to growth remains narrowly based rather than broad-based.
Rich added that a return to sustained growth in the sector depends on consumer confidence rebuilding, which she said is unlikely to happen while cost-of-living pressures remain as prominent as they currently are for households.
BNZ head of research Stephen Toplis offered a more upbeat assessment of the broader economic picture, saying the direction of travel is positive. He said the uplift in the services index, when combined with the surge recorded in the Performance of Manufacturing Index, is enough to suggest that economic growth should soon climb to around 2.0%. While he acknowledged this is not a spectacular figure, he described it as further confirmation that the growth trend seen prior to the recent oil shock is now resuming.
This article was written by fl6553e4b45d84486a91658a8b3f02bf22 at investinglive.com.