NZ services expand modestly, but confidence and hiring remain subdued.
Summary:
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PSI slips but stays in expansion, easing to 50.9 from 51.5 and remaining above the 50 threshold.
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Growth below long-run average, with January’s reading under the historical norm of 52.8.
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Activity and new orders positive, signalling ongoing turnover and forward demand support.
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Employment and inventories weak, both in contraction, pointing to cautious hiring and stock management.
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Confidence still fragile, with negative commentary rising despite signs the broader economy is stabilising.
New Zealand’s services sector remained in expansion territory at the start of 2026, although momentum eased slightly from the previous month.
The BNZ–BusinessNZ Performance of Services Index (PSI) slipped to 50.9 in January from 51.5 in December. While still above the 50-point threshold that separates expansion from contraction, the reading was 0.8 points lower on the month and below the long-run survey average of 52.8. The data suggest the sector is growing, but only modestly, and remains some distance from a robust recovery.
Within the detail, performance was mixed. Two of the five key sub-indices remained in expansion. Activity and sales led the gains at 54.2, signalling that some firms continue to see solid turnover. New orders also stayed positive at 51.8, pointing to a degree of forward demand. However, stocks/inventories fell back into contraction at 49.7, while employment weakened further to 49.1, indicating ongoing caution around hiring.
Business sentiment remains fragile. Nearly 59% of comments received in January were negative, a noticeable increase from December and November. Respondents cited a combination of seasonal factors — including the Christmas–New Year holiday period and related shutdowns — alongside subdued enquiry levels and an extended post-holiday lull. Elevated living and operating costs were also highlighted as ongoing pressures.
The composite Performance of Composite Index (PCI), which combines services and manufacturing indicators, eased to 52.5 from a previously reported 53.9. Despite the pullback, it continues to signal overall economic expansion.
BNZ economists argue that the broader data flow suggests the economy may be turning a corner after a challenging period. While growth remains uneven and confidence subdued, recent indicators have been consistent with a gradual stabilisation in activity.
The January readings reinforce the narrative of an economy moving forward, but cautiously. Expansion is present, though not yet broad-based, and labour market softness remains a key area to watch.
