Insights 
VT 
New Zealand’s services sector remains contracted for a fifth continuous month, with the Services PMI for June at 47.3. This marks an increase of 3.2 points from May but is still below the historical average of 52.9.
Most sub-index results in the survey have shown improvement from the previous month. Over a 16-month period, only one month recorded minimal expansion in the sector.
Sector Performance Overview
The June manufacturing PMI was recently noted at 48.8, a rise from the previous month’s 47.5. Nonetheless, a PMI below 50 indicates worsening conditions in the service sector.
The timeline for New Zealand’s anticipated economic recovery is seeing continued delays. Current figures suggest ongoing challenges in the services and manufacturing sectors.
What we see in the existing figures is a continuation of broad weakness across New Zealand’s private-sector economy, especially in non-goods-producing industries. Although the services PMI has improved slightly, hovering at 47.3 in June, it still points to contraction. A value under 50 in this index means that more businesses are reporting deteriorating conditions than those seeing improvement.
Compared with the average long-term reading of 52.9, the current figure shows consumer-facing firms and broader services may be dealing with weaker demand, stretched margins, or rising costs. This is not a blip — the services side of the economy has been either contracting or barely expanding for over a year now. The one expansionary month out of the last sixteen is the exception, not the rule.
Sector Trends and Implications
The manufacturing PMI, while also below the neutral 50 mark at 48.8, hints at a slightly more stable pattern. That said, neither services nor manufacturing have returned to growth territory, and this extends the stagnation we’ve been tracking since late 2022.
That continued softness has implications. In forward strategy, the gap between current performance and historical benchmarks suggests that expectations for near-term demand should be lowered. Volatility remains contained for now, but traders with exposure to regional proxies or linked markets may wish to revisit positioning, particularly where pricing is predicated on medium-term recovery.
We’re monitoring the disconnection between persistent contraction and improving survey sub-components. While more of the sub-indices have moved upward, they remain net negative. This staged, uneven improvement could indicate a longer runway before we see any upside surprise in output or hiring.
One notable detail is that the downward trend in sentiment remains aligned with delayed macroeconomic rebound signals. Rate-sensitive interest segments, particularly in services, are likely holding back business expansion or consumer spending. This delay changes the horizon for correction in market expectations, likely stretching out any pivot or pickup further than previously assumed.
In terms of positioning, this could mean keeping duration bias steady, while allowing for some optionality capture as we watch for inflection. No strong barometers are showing local upturn yet. We should be careful not to read temporary increases in PMI values as indicators of a shift in growth path. Historically speaking, improvements must be sustained and move well above the 50-mark before genuine activity gains are likely to follow through.
Subtle shifts can, however, begin to show up in expectation pricing. We’re in a holding pattern now. Any deviation from expected consensus values in the upcoming months will demand attention — particularly if it reflects sudden optimism from businesses or changes in pricing power.
Pressure on margins and order volumes remains the dominant element. Watching how these factors evolve relative to forward guidance will help determine whether this cycle finds a bottom — or stretches out into stagnation.
