The services sector remains in contraction, although the decline has slowed. The BusinessNZ Performance of Services Index (PSI) for October increased by 0.4 points to 48.7. Despite the improvement, the index stays below the long-term average of 53.
A reading under 50 points signifies that the services sector, which represents roughly 75% of the economy, is shrinking.
BusinessNZ chief executive Katherine Rich stated that although activity increased for the second month in a row, the fact that no sub-index reached above 50.0 indicates the sector is still facing challenging conditions.
Activity/sales at 48.9 hit its highest point since January 2025, and new orders/business at 49.5 dipped slightly from September.
Meanwhile, employment at 48.8 increased by 0.9 points compared to September, marking its highest level since March 2025.
The share of negative comments in October, at 54.1%, decreased compared to 58% in September and 59.6% in August.
Businesses in the service sector kept experiencing sluggish demand and lower customer spending, driven by the economic slowdown, cost-of-living challenges, and diminished confidence.
Additional issues included increasing operating costs, delays, heightened competition, and project cancellations.
BNZ senior economist Doug Steel noted that while last week’s stronger Performance of Manufacturing Index (PMI) had sparked hopes of an economic recovery, the Performance of Services Index (PSI) results tempered that optimism.
However, Steel pointed out that the overall news wasn’t entirely negative, as combined activity levels showed a modest improvement. He said it is approaching a level that aligns with the modest economic growth rates currently forecasted.