New Zealand’s services sector took a steep turn downward in May, with the BusinessNZ Performance of Services Index plunging from 48.1 to 44.0, the lowest reading since June 2024. Activity and new orders led the decline, falling from 46.7 and 50.2 to 40.1 and 43.2 respectively, as businesses reported broad-based weakness in demand. Employment also edged down from 47.9 to 47.2.
Sentiment on the ground paints an equally grim picture. Negative commentary from survey respondents rose to 65.6%, up from 61.8% in April. Businesses cited reduced consumer spending, revenue declines, and heightened uncertainty over inflation, interest rates, and the economic outlook. Many reported that customers are delaying decisions and becoming more cautious in their spending—mirroring trends typically seen during periods of economic stress.
BNZ Senior Economist Doug Steel noted that the PSI collapse closely follows the earlier fall in the Performance of Manufacturing Index, reinforcing signs of widespread economic fragility. With both key sectors now contracting, concerns are rising that New Zealand may be “returning to recession”.
