Weak Hiring Weighs on NZ Services Recovery, RBNZ to Stay Cautious
NZ services PMI held at 50.6 in July, but employment at 48.5 signals a fragile recovery that could keep the RBNZ cautious on rate moves ahead.
New Zealand's services sector held above the 50.0 breakeven line for a second straight month in July, with the Performance of Services Index (PSI) slipping to 50.6 from June's 50.9, BusinessNZ data showed Tuesday. The modest cooling offers limited fresh direction for the New Zealand dollar, with the real focus on the weak employment sub-index that, at 48.5, points to a recovery that remains narrowly based, BusinessNZ chief executive Katherine Rich said.
Rich told reporters it was encouraging to see the index hold above breakeven for a second month. She flagged employment and supplier deliveries, both at 48.5, as the sector's persistent soft spots. She said the recovery is likely to stay modest until consumer confidence firms up further. Respondent commentary painted a cautious picture. Cost of living pressures, fuel prices, rising interest rates, and election uncertainty were the most common concerns, with 64% of comments negative.
Among the five sub-indices, new orders were the strongest at 52.6. Stocks/inventories followed at 51.6, and activity/sales came in at 50.5. Employment and supplier deliveries lagged, each stuck at 48.5, showing how narrowly based the improvement remains.
BNZ senior economist Doug Steel struck a more upbeat tone. He said the past two months had delivered the best PSI readings in roughly three years, and that the activity/sales sub-index climbed back above 50 for the first time in six months. The data suggest the services recovery is real, though still fragile. Weak hiring intentions are likely to keep the RBNZ's growth outlook cautious, Steel said.
For a broader view of the New Zealand dollar's trajectory, see AlphaScala's constant forex market analysis. The RBNZ's next rate decision is in October.
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