Source: Radio New Zealand
- NZ’s dervices sector is contracting at a slower pace
- Results across sub-indexes were mixed
- The employment outlook stayed negative
- BNZ says the economy is still struggling
New Zealand’s services sector remained in contraction in April. 123RF
New Zealand’s services sector remained in contraction in April, despite a modest improvement in activity, as high fuel costs and weak discretionary spending continued to weigh on businesses.
The BNZ-BusinessNZ Performance of Services Index (PSI) rose 2.7 points to 48.9, up from 46.2 in March.
A reading below 50 indicates the sector – which accounts for nearly three-quarters of the economy – is contracting.
BusinessNZ chief executive Katherine Rich said more than two-thirds of comments from respondents were negative.
“Many of the comments focused on fuel prices,” she said.
“With the continuing conflict affecting shipping through the Strait of Hormuz, it is difficult to foresee a quick return to expansion in the sector.”
The survey showed mixed results across sub-indexes, with new orders back in expansion at 51.2, but most other measures – including employment, sales, and supplier deliveries rising – which all rose but remained in contraction.
Smaller firms, particularly those with fewer than 10 employees, were finding conditions more difficult than larger businesses.
Stocks and inventories rose to 47.6, employment to 48.5, and sales to 48.9, while supplier deliveries slipped to 46.6.
BNZ head of research Stephen Toplis said the slight lift in the headline reading did little to change the broader picture.
Toplis cautioned that “at first glance the jump in the headline index … might be read as hope the New Zealand economy is proving to be remarkably resilient to the war in the Middle East.”
“On the other hand, it could be interpreted as further evidence the economy is struggling to get its head above water.”
Toplis said underlying details pointed firmly to the latter view, with employment “particularly concerning” as it remained below the breakeven 50 mark for the 29th consecutive month.
He also highlighted a sharp drop in discretionary spending, particularly across accommodation, cafés and restaurants, as households face ongoing cost pressures.
The data, alongside Friday’s weak manufacturing survey, is consistent with BNZ’s forecast that Q2 GDP will struggle to climb above zero, according to Toplis.
– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand