‘Worst since 2007’: Poor retail sales behind services slump

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The country’s services sector has plumbed new depths with another record fall in activity.

The BNZ-Business New Zealand Performance of Services Index (PSI) fell 2.4 points in June to 40.2 – a reading below 50 indicated a contraction.

It was the second month in a row the sector recorded the lowest level of activity outside the Covid lockdowns.

BNZ senior economist Doug Steel said the PSI had been well below average for more than a year and the weakness appeared to be accelerating.

Poor sales in the retail sector stood out as a driver behind the weakening.

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Business New Zealand chief executive Kirk Hope said this month’s result showed high interest rates were slowing down the economy.

“Simply, there’s just less money in the economy as interest rates have risen, so effectively, people have less to spend.

“Services consists of a group of industries which rely on discretionary spending – areas like hospitality and tourism – so you’re seeing activity in those spaces really decline month on month.

“It’s probably the the worst month that we’ve seen for a non-Covid lockdown month since the survey began in 2007.”

The sector’s future would not be clear until there was certainty on where interest rates might land, he said.

“There are certainly indications that they’ll start to go lower. Until that happens, I think we’re sort of stuck in a bit of a funk, to be honest.

“If you look at the proportion of negative comments for this June PSI, it’s 67 percent, which is up on May at 65 and also April at 66. So people have been doing it tough for most of this year.”

The combined PSI & PMI index also fell to its lowest level outside of Covid lockdowns.

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