In July 2025, the New Zealand Business Services Index (BSI) stood at 48.9. This marks an increase from the previous index figure of 46. <\/p>\n
The previous figure for June 2025 was later revised upward from its initial value of 46 to 47.3. This suggests an improvement in business services performance over the period observed.<\/p>\n
The recent New Zealand Business Services Index, which rose to 48.9 for July 2025, suggests the downturn in the services sector is easing. Although the index remains below the 50-point mark indicating contraction, this improvement from the revised 47.3 prior shows a slowing decline. We see this as a sign that the sector may be approaching a bottom after a prolonged period of weakness.<\/p>\n
This better-than-expected data reduces the immediate pressure on the Reserve Bank of New Zealand to cut the Official Cash Rate from its current high of 5.50%. Given that the Q2 2025 inflation rate was still stubborn at 3.4%, the RBNZ will likely wait for more conclusive evidence of a slowdown before signaling any policy pivot. Therefore, we should consider pushing out expectations for rate cuts, possibly adjusting interest rate swap positions to reflect a first move in Q1 2026 rather than late 2025.<\/p>\n
For the New Zealand dollar, this development is moderately supportive, especially against currencies where central banks are more dovish. A delay in RBNZ rate cuts increases the NZD’s yield advantage. We could look at buying short-dated NZD\/AUD call options, as the cross has been consolidating around 0.9250 and this data could provide a catalyst to break higher.<\/p>\n
This slight improvement in services, combined with the manufacturing PMI which also showed a modest lift to 47.8 last month, paints a picture of a stabilizing economy. While not a signal of strong growth, it does lower the tail risk of a deep recession that had been priced into the market earlier in 2025. This may warrant cautiously selling out-of-the-money put options on the NZX 50 index, as underlying corporate conditions appear to be troughing.<\/p>\n
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