New Zealand’s services sector slipped deeper into contraction in May, with the BNZ-BusinessNZ Performance of Services Index falling from 48.7 to 47.5. The latest reading marked another month below the 50-point threshold that separates expansion from contraction, reinforcing signs that domestic demand remains subdued despite broader hopes of economic recovery.
The weakness was led by a sharp deterioration in activity and sales, which dropped from 48.5 to 44.7, while new orders/business fell from 50.9 to 47.6. Employment edged up marginally from 48.5 to 48.6 but remained in contractionary territory. Stocks/inventories eased from 47.6 to 47.5, while supplier deliveries improved from 46.8 to 49.5, suggesting firms may be able to respond quickly should demand eventually recover.
BusinessNZ Chief Executive Katherine Rich said sectors reliant on discretionary spending, including cafes, restaurants and recreational services, were among the weakest performers as consumers remained cautious about spending. More than two-thirds of respondents reported negative business conditions, citing rising costs—particularly fuel—and weak demand linked to poor consumer confidence. BNZ Senior Economist Doug Steel said the PSI continues to oscillate in contraction territory, indicating a services sector that is still struggling to regain its footing.
| Indicator | Apr 2026 | May 2026 | Change |
|---|---|---|---|
| BNZ-BusinessNZ PSI | 48.7 | 47.5 | -1.2 pts |
| Activity/Sales | 48.5 | 44.7 | -3.8 pts |
| Employment | 48.5 | 48.6 | +0.1 pts |
| New Orders/Business | 50.9 | 47.6 | -3.3 pts |
| Stocks/Inventories | 47.6 | 47.5 | -0.1 pts |
| Supplier Deliveries | 46.8 | 49.5 | +2.7 pts |
