New Zealand’s services sector is contracting more deeply, with broad-based weakness and falling confidence driven by geopolitical uncertainty. The data point to slowing growth and rising downside risks to the economic outlook.
New Zealand Services PMI for March 2026 46.0
- prior 48
Composite 48.8
- prior 50.5
Summary:
- New Zealand services sector contracts further in March (PSI 46.0)
- Weakest activity driven by discretionary spending segments
- All sub-indexes in contraction; sales/activity notably soft
- Conflict-driven uncertainty weighing on confidence and demand
- Combined PMI/PSI signals rising risk of economic contraction
New Zealand’s services sector weakened further in March, with the BNZ–BusinessNZ Performance of Services Index (PSI) falling to 46.0, signalling a deeper contraction in activity. The reading declined 1.6 points from February and sits well below the long-run average of 52.8, underscoring the extent of the slowdown.
The downturn appears broad-based, with all five key sub-indexes registering below the 50 threshold that separates expansion from contraction. The most pronounced weakness was seen in the Activity/Sales component, which dropped to 44.6, highlighting a sharp pullback in demand.
Survey responses suggest the softness is closely tied to deteriorating consumer confidence, particularly in sectors reliant on discretionary spending. Industries such as accommodation, hospitality, and recreational services have been among the hardest hit, as households become more cautious in response to rising uncertainty linked to the ongoing Middle East conflict.
This cautious backdrop is also reflected in business sentiment. A significant 69.1% of respondent comments were negative, a notable increase from 56.4% the previous month, indicating a rapid deterioration in confidence across the sector. Many firms explicitly pointed to the geopolitical situation as a key driver of weaker demand conditions.
From a macro perspective, the data raise concerns about broader economic momentum. BNZ noted that when combined with manufacturing indicators, the overall signal points toward a heightened risk of contraction in economic activity. While a formal recession is not currently the base case, the bank has revised down its growth outlook for 2026, reflecting the cumulative drag from weaker demand and heightened uncertainty.
Overall, the latest PSI highlights an economy losing momentum, with services—typically a stabilising force—now acting as a source of downside risk.
