New Zealand's services sector showed a modest improvement in April but remained in contraction, with persistent cost pressures and global shipping disruptions continuing to weigh on sentiment, according to a statement by BusinessNZ on Monday.
The BusinessNZ Performance of Services Index (PSI) rose to 48.9 in April from 46.2 in March. A reading below the 50-point mark points to contraction.
Rising fuel costs and ongoing disruption to shipping through the Strait of Hormuz have weighed heavily on business sentiment, with more than two-thirds of respondents reporting negative conditions over the past month and little sign of a near-term recovery, said Katherine Rich, BusinessNZ's chief executive.
The activity/sales indicator rose to 48.9 in April from 44.7 in March, while the employment measure increased to 48.5 from 46.6. Stocks/inventories inched up to 47.6 from 46.2, supplier deliveries decreased to 46.6 from 47.2, and new orders/business increased to 51.2 from 46.
Micro-businesses were struggling in April, with a sub-index of 44.4, while medium to large firms remained in healthy expansion at 55.5, the report said.
A rise in the headline index points to slightly improved sentiment, but mixed underlying signals keep the outlook for the New Zealand economy uncertain amid ongoing global headwinds, said Stephen Toplis, BusinessNZ's head of research.
The seasonally adjusted BusinessNZ Performance of Composite Index fell as continued weakness in the PSI weighed on activity, although manufacturing showed slight expansion in April.
The gross domestic product-weighted and free-weighted indexes both showed a slower contraction in April, standing at 48.6 and 49.4, respectively, compared with 46.9 and 48.7 in March.