Services sector activity weakened further in November, hitting its lowest level in six months and dimming prospects for a recovery next year.
The BNZ-BusinessNZ Performance of Services Index (PSI) dropped 1.5 points in November to 46.9.
A reading below 50 signals contraction in the sector, which has not expanded since February 2024.
BusinessNZ chief executive Katherine Rich stated that the latest reading has dashed immediate hopes for a shift toward expansion.
“Negative comments received show the services sector overwhelmingly citing the weak economic environment, including low consumer confidence, high living costs, inflation, interest rates, and reduced spending, as the main factors affecting recent activity.”
All five sub-indicators declined, showing the steepest drop in activity/sales, then deliveries and employment, as new orders/business stayed just under the breakeven line.
For BNZ senior economist Doug Steel, the PSI reading serves as a wake-up call.
“Combined with the Performance of Manufacturing Index (PMI), the composite activity indicator poses downside risk to even modest growth expectations for early next year.”
The retail sector provided the sole bright spot, climbing to its strongest November reading since 2017.
“Some of this might reflect changing spending patterns associated with seasonal sales (Black Friday). In any case, growth is coming off a low base.”
“We will have to wait until the new year to assess December spending and see whether it can add more support to the PSI,” Steel added.