Another month of solid activity levels in the services sector is challenging the narrative that the country could be headed for a recession.
Man paying with NFC in a grocery store. Photo:
The BNZ - BusinessNZ Performance of Services Index rose a mere 0.1 points in June to 55.4 points, after jumping to its highest level in nearly a year in May.
Any reading above 50 suggests expansion, while anything below indicates contraction.
BNZ senior economist Craig Ebert said the move to the orange traffic light setting in April, along with gradual reopening of the border, was providing a basis for "sustained improvement" in the services sector - which accounts for about two thirds of the economy.
"Not only was it another good result for the PSI in June, but a successive one above the long-term average of 53.6."
The headline reading in the index was underpinned by healthy readings in the key sub-measures of new orders, employment and sales.
However, supply chain disruptions continued to be a sore spot for businesses in the services sector, which continues to sit below the 50-breakeven point at 47.8.
Complaints about various costs, including fuel and absenteeism also remained dominant in the survey's feedback.
Ebert said this explained why more than two thirds of the comments in this month's survey were denoted as negative rather than positive, while the PSI reading overall was comfortably positive.
"Patchy as it was, under its glowing surface, June's PSI was nonetheless positive enough to counter claims the NZ economy is going into recession already.
"The latter idea was certainly piqued by the fact the PSI's manufacturing cousin, the PMI, sagged to 49.7 in June."
Ebert said after combining the results from the latest PMI and PSI, the result suggests that the economy had some momentum about it after contracting by 0.2 percent in the three months ended March.
