Diesel prices jumped 94.9% in two months
Fuel prices linked to ongoing conflict affecting shipping through the Strait of Hormuz continued to pressure New Zealand’s services sector in April, with the BNZ-BusinessNZ PSI remaining in contraction at 48.9 despite improving from March.
The latest PSI reading rose from 46.2 in March, although it remained below the 50-point threshold indicating growth in the sector. BusinessNZ said more than two-thirds of survey respondents reported negative conditions during the month, with fuel prices appearing frequently in feedback from businesses.
Strait disruption feeds cost pressures
BusinessNZ chief executive Katherine Rich linked the pressure on businesses to ongoing disruption affecting shipping routes through the Strait of Hormuz.
“More than two-thirds of the respondents commented that the factors influencing their business during the past month were negative, and many of the comments focused on fuel prices. With the continuing conflict affecting shipping through the Strait of Hormuz, it is difficult to foresee a quick return to expansion in the sector,” Rich said.
Recent figures showed the scale of fuel cost increases following the outbreak of conflict in the Middle East. Petrol prices rose 33.6% in the two months since February 2026, while diesel prices increased 94.9% over the same period. In annual terms, petrol prices climbed 30.1% in the 12 months to April, while diesel rose 91.3%.
Domestic airfares increased 4.2% from March to April, while international airfares rose 6.2% over the same period. Electricity prices increased 2.3% in April, taking the annual increase to 13.1%.
The wider disruption to oil supply routes has drawn attention across New Zealand’s fuel sector. Roughly 20% of the world’s oil and gas typically passes through the Strait of Hormuz, with supply disruptions quickly affecting fuel pricing and refinery operations across Asia.
Asian refineries reduced production during the early stages of the disruption, contributing to higher global oil prices before additional crude supply entered the market.
Orders improve while employment stays weak
Despite ongoing pressure across the sector, the PSI’s new orders/business sub-index returned above the 50-point level in April, rising to 51.2 from 46.0 in March.
Activity/sales improved to 48.9 from 44.7, while employment increased to 48.5 from 46.6. Stocks/inventories rose to 47.6 from 46.2. Supplier deliveries remained the weakest category at 46.6, compared with 47.2 in March.
BNZ head of research Stephen Toplis said the latest result could be interpreted in different ways.
“At first glance the jump in the headline index from 46.2 in March to 48.9 in April might be read as hope the New Zealand economy is proving to be remarkably resilient to the war in the Middle East. On the other hand, it could be interpreted as further evidence the economy is struggling to get its head above water,” Toplis said.
The employment indicator had remained below the 50-point breakeven level for 29 consecutive months. The combined employment index for manufacturing and services also indicated no current employment growth.
Smaller firms report weaker conditions
Micro-businesses employing between one and 10 staff recorded a sub-index reading of 44.4 in April, while medium-large businesses employing 51-100 staff posted 55.5.
Regional readings also showed mixed conditions. Business South recorded 51.1, while EMA posted 48.0, Business Central registered 45.7 and Business Canterbury stood at 40.2.
The BNZ-BusinessNZ Performance of Composite Index, which combines manufacturing and services activity, remained below 50 in April. The GDP-weighted index rose to 48.6 from 46.9 in March, while the free-weighted index increased to 49.4 from 48.7.
According to the report, the manufacturing component of the PCI was slightly above 50 in April, although the larger services component kept the overall index below expansion territory.
Overseas readings outpace New Zealand
International PSI readings included the UK at 52.7, China at 52.6, Japan at 51.2, the US at 51.0 and Australia at 50.7. The eurozone recorded 47.6, while New Zealand stood at 48.9.
According to economists rising fuel and energy costs could contribute to higher inflation in coming months, with ASB forecasting annual inflation could reach 4.3% in the June quarter from 3.1% in March.
