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New Zealand's Service Sector Contracts Further in May Amid Weak Spending

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New Zealand's Service Sector Contracts Further in May Amid Weak Spending

New Zealand's services sector showed further contraction in May as the country continues to see the impacts of higher fuel costs and low spending.

The BusinessNZ Performance of Services Index, or PSI, fell to 47.5 in May from 48.7 in April, moving farther away from the 50-point mark which separates contraction and expansion.

"It is frustrating to see the services struggle, but it is difficult to see how the sector's fortunes will turn around quickly," said BusinessNZ Chief Executive, Katherine Rich.

This comes after the BusinessNZ Performance of Manufacturing Index, or PMI, fell into contraction in the same month, also impacted by weakening customer demand and higher fuel prices.

The seasonally adjusted BusinessNZ Performance of Composite Index, or PCI, which combines the PMI and PSI, showed widening contraction in both components in May, with the GDP-weighted index falling 0.5 points to 48 and the free-weighted index falling 0.8 points to 48.4.

The Reserve Bank of New Zealand and other forecasters are expecting weaker consumption growth this year due to lower purchasing power after filling the car, said ANZ in its ANZ-Roy Morgan NZ Consumer Confidence report on May 29.

On the bright side, the US and Iran said on Sunday that they have agreed on a peace framework for a deal ​to end their war and reopen the Strait of Hormuz, a development that has eased Brent crude oil by about 4%.

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