The services sector extended its run of growth to three months in August, but the recovery is yet to spread across the wider economy.
New Zealand’s services sector has expanded for a third consecutive month, with new business continuing to drive a gradual recovery across the country’s largest economic sector.
The BNZ-BusinessNZ Performance of Services Index (PSI) rose 0.6 points in August to 51.2. A reading above 50 indicates expansion, while a reading below that level signals contraction.
The result was the strongest since September 2023, matching the level reached in December 2025, but still falling short of the long-term average of 52.7.
Services account for about three-quarters of New Zealand’s economic activity, making the survey a closely watched proxy for the broader economy.
BusinessNZ chief executive Katherine Rich said the latest result was encouraging, but warned the recovery remained fragile.
“With three of the five sub-indices still below 50, there’s clearly more ground to make up before we can call this a solid turnaround,” she said.
The strongest component of the survey was new orders and business activity, which rose to 55.2, suggesting demand is continuing to improve.
However, employment remained below 50 at 49.4, indicating staffing levels are still declining.
Activity and sales also slipped back below the 50 breakeven mark in August.
Feedback from businesses surveyed pointed to ongoing concerns about the cost of living, interest rates and uncertainty ahead of the election.
More than 60 percent of respondents provided negative comments about business conditions.
‘Some confidence’
BNZ senior economist Doug Steel said the sector appeared to be moving in the right direction, although growth was not yet broad-based.
“The PSI’s three-month moving average keeps rising and, at 50.9, is at its highest level since July 2023,” Steel said.
“This gives some confidence that the sector is trending upwards, even if the recovery remains fragile.”
Steel said the strongest performance was coming from services linked to the export sector, particularly transport and storage, while consumer-facing sectors remained weaker.
Retail activity improved and clawed its way above 50 for the first time since January, and although accommodation, cafes and restaurants gained 12.5 points in August to 49.2, they are still in contraction territory.
Steel said rising oil prices and any subsequent pressure on household budgets remained risks, but the combination of the services and Friday’s manufacturing surveys was consistent with annual economic growth of about 2 percent.
BNZ expects economic growth in the second half of the year to be stronger than in the first.