New Zealand's Business NZ Performance of Services Index (PSI) fell back into contraction in December after hitting a six-month high in November, according to data from Business NZ. December's NZ PSI fell to 48.8 versus the previous 51.2.

The six-month average for the NZ PSI was 49.3 as New Zealand struggles to develop economic confidence according to indexed survey results.

According to BNZ Head of Research Stephen Toplis, "the softening in the PSI, alongside the weakness in the PMI, is bad news for both near term growth and employment in New Zealand. Tourism has been a key driver of the services sector and will continue to support the economy, but it can’t do all the heavy-lifting by itself”.

Market reaction

The NZD/USD is trading down into 0.6070 after finding steady declines on Monday.

About the Business NZ Performance of Services Index (PSI)

The Business NZ Performance of Services Index (PSI), released by Business NZ on a monthly basis, is a leading indicator gauging business activity in New Zealand’s services sector. The data is derived from surveys of senior executives at private-sector companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production or employment. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the New Zealand Dollar (NZD). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for NZD