By James Glynn
SYDNEY--Activity in New Zealand's services sector slumped to its lowest level in nearly two decades in May, highlighting the moribund state of the farm-rich economy as elevated interest rates bite.
The BNZ-BusinessNZ Performance of Services Index stood at a deeply contractionary 43 points in May, down 3.6 points from April to record its weakest result since 2007 when Covid lockdowns are excluded.
A reading below 50 points indicates activity in the sector is in decline.
The outcome is consistent with a lengthening recession for the country, with first quarter growth data on Thursday expected to show the economy began this year in a depressed state.
A contraction in GDP growth in the first quarter would mark the fifth decline in the last six quarters, despite strong population growth in that time.
The economy is still correcting a demand imbalance after it became badly overheated in the period following Covid-19 lockdowns, with the Reserve Bank of New Zealand choosing a restrictive policy stance and warning in May that interest rates may need to remain high for longer than earlier anticipated.
"The May result was as bad as it can get for the sector, reaching contraction levels greater than during the global financial crisis of 2008-09," said Kirk Hope, BusinessNZ's chief executive.
Activity and sales in the services sector recorded a reading of just 40.9 points in May, and the new orders and business index came in at 42.6, according to the data.
Write to James Glynn at james.glynn@wsj.com
(END) Dow Jones Newswires
06-16-24 1932ET
