New Zealand’s services sector slipped back into contraction in February. BusinessNZ Performance of Services Index fell from 50.7 to 48.0, well below the survey’s long-term average of 52.8. The sector’s return to expansion proved short-lived, lasting only two months before momentum faded again.
The decline was broad-based across key components. Activity and sales dropped from 53.8 to 47.9, while employment fell from 49.0 to 47.2. New orders and business also weakened, slipping from 51.6 to 49.3, suggesting demand conditions remain soft despite signs of stabilization in parts of the manufacturing sector.
Negative sentiment remained elevated. Around 56.4% of comments were negative in February, slightly lower than January’s 58.7% but still above December’s 50.4%. Businesses pointed to weak economic conditions, high living costs, inflation and interest rates as factors restraining consumer spending.
BNZ Senior Economist Doug Steel said the latest PSI was “a real disappointment,” noting that it signals the economy is recovering more slowly than expected despite the relatively upbeat Performance of Manufacturing Index released last week.
