New Zealand services sector contracts while retail spending hits two‑year high

New Zealand’s services sector deepened its downturn in May 2026, with the BNZ‑BusinessNZ Performance of Services Index falling to 47.5, below the 50‑point expansion threshold. Activity and sales dropped to 44.7, new orders slipped to 47.6 and employment barely improved to 48.6, keeping the sector in contraction. BusinessNZ chief Katherine Rich highlighted weakness in discretionary areas such as cafés, restaurants and recreational services as consumers remained cautious.

In contrast, retail activity showed strength. Core retail spending rose 2.8% year‑on‑year in May, the strongest increase in more than two years, according to Retail NZ. The durables segment, including furniture, hardware, electronics and pharmacies, jumped 4.8%, while hospitality sales grew 3.2%, boosted by recent sporting and music events and the King’s Birthday weekend. Growth in consumables was modest as shoppers continued to manage everyday budgets, switching to cheaper brands despite lower fuel prices.