New Zealand's services sector contracts as fuel costs rise

New Zealand’s services sector remained in contraction in April, although conditions improved slightly from the previous month as rising fuel costs and weak discretionary spending continued to pressure businesses, according to a survey released Monday, News.Az reports, citing Xinhua.

The Bank of New Zealand-BusinessNZ Performance of Services Index increased to 48.9 in April from 46.2 in March. However, the reading stayed below the 50-point threshold that separates expansion from contraction.

Katherine Rich, chief executive of BusinessNZ, said in a statement that more than two-thirds of survey respondents reported negative factors affecting their businesses during the month, with many highlighting fuel prices as a major concern.

“With the continuing conflict affecting shipping through the Strait of Hormuz, it is difficult to foresee a quick return to expansion in the sector,” Rich said.

The survey showed the new orders sub-index returned to expansion territory at 51.2. However, the remaining four sub-indexes continued to contract, with supplier deliveries posting the weakest reading at 46.6.

BusinessNZ said micro-businesses employing between one and 10 staff members faced the greatest pressure in April, recording a sub-index reading of 44.4. In contrast, medium-to-large companies with 51 to 100 employees posted the strongest result at 55.5.

Stephen Toplis, head of research at BNZ, said the modest improvement in April could either reflect resilience to the conflict in the Middle East or, more likely, indicate that the economy was still “struggling to get its head above water.”

Toplis added that activity in accommodation, cafes and restaurants fell sharply during April as households reduced discretionary spending, an area typically among the first to feel the impact of tighter consumer budgets.

News.Az 

By Nijat Babayev