NZ services sector PSI climbs to 51.2 in third month of expansion

The latest data adds to a growing, if still modest, case that New Zealand's services sector is stabilising. That matters for how the Reserve Bank of New Zealand reads domestic demand ahead of upcoming policy decisions. With a third straight month of expansion and the three-month moving average also rising, there is some support for the view that the earlier contraction has passed. However, the improvement remains narrow, as three of the five sub-indices sit below the 50 mark. Soft readings for employment and activity/sales, along with a majority of respondent comments turning negative on cost of living, interest rates and election uncertainty, suggest this is not yet a signal for the NZD to lean heavily bullish. Markets are likely to treat this as a modestly supportive but non-decisive data point, rather than one that shifts the rate path narrative by itself.

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New Zealand's services sector recorded its strongest reading since returning to growth, but with sentiment souring and half the sub-indices still in contraction, this looks like a fragile recovery rather than a solid turnaround.

Summary:

• The BusinessNZ Performance of Services Index rose to 51.2 in August from 50.6 in July, marking a third consecutive month of expansion for the services sector.
• August's reading matches December 2025 and is the highest the PSI has been since September 2023.
• BusinessNZ chief executive Katherine Rich described the result as encouraging but said the recovery remains fragile, noting three of the five sub-indices are still below 50.
• Respondent comments turned more negative compared with July, with 60.8% of comments citing cost of living pressures, interest rates, and election uncertainty.
• New Orders/Business was the strongest sub-index at 55.2, followed by Stocks/Inventories at 50.8, while Supplier Deliveries was weakest at 49.0, with Employment and Activity/Sales also soft at 49.4 each.
• BNZ senior economist Doug Steel said the three month moving average, at 50.9, is at its highest level since July 2023, offering some confidence the sector is trending upward despite the fragility.

New Zealand's services sector extended its run of growth to three consecutive months in August, according to the BNZ, BusinessNZ Performance of Services Index, though the organisation cautioned the recovery remains fragile.

The PSI climbed to 51.2 in August, up from 50.6 in July and 50.9 in June. Readings above 50 mean the services sector is generally expanding, while those below 50 signal contraction. The August figure matches the level recorded in December 2025 and is the strongest since September 2023, giving the sector its best result since it returned to growth.

BusinessNZ chief executive Katherine Rich welcomed the improvement but tempered expectations, saying it was encouraging to see the index post its strongest reading since the recovery began, while noting the reading of 51.2 still reflects a fragile turnaround. She pointed to three of the five sub-indices remaining below the 50 threshold as evidence there is more ground to cover before the sector can be described as solidly turning around.

The breakdown of sub-indices supports that cautious framing. New Orders/Business was the strongest component at 55.2, followed by Stocks/Inventories at 50.8. Supplier Deliveries was the weakest sub-index at 49.0, with Employment and Activity/Sales also soft at 49.4 each, underlining that the improvement in headline conditions has not yet broadened evenly across the sector.

Sentiment among survey respondents softened compared with July, with 60.8% of comments coming in negative. Cost of living pressures, interest rates, and election uncertainty were the themes most frequently cited as weighing on businesses, suggesting that while activity indicators have improved, the underlying mood among services firms has not kept pace.

BNZ senior economist Doug Steel offered a more constructive read on the trend, noting that the PSI's three month moving average has continued to rise and now sits at 50.9, its highest level since July 2023. Steel said this gives some confidence that the sector is trending upward, even as the fragility BusinessNZ highlighted keeps the overall picture short of a clear and durable recovery.