New Zealand Services Contraction Eases as Fitch Reaffirms AA+ Rating

New Zealand’s services sector showed signs of stabilising in July, with the seasonally adjusted BusinessNZ Performance of Services Index rising to 48.9 from 47.3 in June. While still below the 50 mark that separates contraction from expansion, the reading is the highest in four months and suggests a slower pace of decline in activity across transport, retail, and hospitality. Separately, Fitch Ratings reaffirmed the country’s long-term foreign-currency issuer default rating at AA+ and kept the outlook at stable. The agency cited New Zealand’s strong governance and credible macroeconomic policy framework, although it warned that elevated public debt following the pandemic and recent weather-related rebuilding costs continue to weigh on fiscal metrics. Finance-ministry data showed overseas investors held 62.8% of New Zealand government bonds in July, inching up from 62.7% a month earlier. In a quarterly survey released by the Reserve Bank of New Zealand, two-year inflation expectations eased to 2.64%, remaining within the central bank’s 1%-to-3% target band and supporting expectations that policy rates are likely to stay on hold in the near term.