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- Services sector expands at a slower pace in January
- Sales activity continues rising, employment falls
- Proportion of negative comments increases
- BNZ says economy is on the right track
The services sector recovery slowed to a crawl last month.
The BNZ-BusinessNZ Performance of Services Index (PSI) fell by 0.8 points to 50.9 in January, below its long-term average of 52.8.
A reading above 50 indicates the sector, which accounts for nearly three quarters of the economy, is expanding.
BusinessNZ’s chief executive Katherine Rich said despite the slowdown in January the sector remained on the right side of the ledger after such a lengthy period of contraction.
Activity/sales was the only sub-index to rise in January, with a softer reading for new orders/business, while stocks/inventories, supplier deliveries, and employment moved further into contraction.
The proportion of negative comments climbed to 58.7 percent, with firms reporting low confidence, holiday shutdowns and high operating costs.
BNZ senior economist Doug Steel preferred to concentrate on the direction of travel of the data, rather than one month’s results, saying that “the big question to end 2025 was whether the economy may be turning”.
“Data since then has given us confidence that recent positive momentum can be sustained. The economy is growing.”
The combined PSI/PMI activity indicators are consistent with BNZ’s forecasts of rising GDP this year, according to Steel.
He expected the Reserve Bank to leave interest rates unchanged this week, but a key question for the Reserve Bank would be when does increasing economic growth start translating into higher inflation.
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