New Zealand’s services sector has emerged from a prolonged slump, adding to signs that domestic growth momentum is rebuilding into 2026.
Summary:
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Services sector expanded for the first time since February 2024
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PSI rose to 51.5, a 4.3-point lift from November
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New orders and activity drove the improvement
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Employment remained in mild contraction
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Combined with PMI, data point to firmer late-2025 growth
New Zealand’s services sector moved back into expansion territory in December for the first time since early 2024, offering a tentative but meaningful signal that domestic activity is stabilising. The latest BNZ – BusinessNZ Performance of Services Index (PSI) rose to 51.5 in December, up sharply from November and above the 50.0 threshold that separates contraction from expansion.
While the headline improvement is encouraging, the index remains below its long-run average of 52.8, underscoring that momentum is still modest. Even so, December’s reading marked the end of the longest sustained downturn in the services sector since the survey began, with contraction persisting for 21 consecutive months.
Details within the report point to a broadening, albeit uneven, recovery. Three of the five sub-indices moved into expansion. New Orders and Business Activity led the improvement, climbing to 52.5 after four months of contraction, while Activity/Sales followed closely at 52.2. Stocks and Inventories also edged higher into expansion at 51.9, suggesting firms are beginning to prepare for improved demand conditions.
Labour market dynamics, however, remain a clear constraint. The Employment sub-index stayed in contraction at 49.6, highlighting ongoing caution among firms when it comes to hiring, despite improved activity indicators.
Sentiment measures continue to reflect lingering challenges. Just over half of respondents reported negative conditions, though this proportion eased compared with previous months. Firms cited weak demand, subdued confidence, and elevated living and operating costs as persistent headwinds, alongside seasonal disruptions linked to Christmas shutdowns.
More positively, businesses also pointed to seasonal summer demand, improving consumer confidence as interest rates fall, stronger tourism flows, and new contracts as emerging supports
