New Zealand’s BusinessNZ Performance of Services Index (PSI) was **50.9** in January, down from **51.5** in the previous month.
A PSI reading **above 50** means the services sector is **expanding**. A reading **below 50** means it is **contracting**.
The latest PSI shows the New Zealand economy is still growing, but growth has clearly slowed since December. The drop to **50.9** suggests last year’s high interest rates are starting to reduce business activity. This is a key sign that the momentum seen in **2025** is fading.
This data makes the Reserve Bank of New Zealand less likely to raise rates at its next meeting. Inflation has been easing to **3.5%**, and unemployment rose to **4.1%** at the end of last year. Together, these trends weaken the case for more hikes. We should consider **buying NZD put options** or **shorting NZD/USD futures** to position for a weaker New Zealand dollar.
Interest rate markets will likely respond by removing any remaining chance of a rate hike this year. As traders adjust, **short-term government bond yields** could fall. This supports positions in **interest rate swaps** that benefit if the central bank holds rates steady, or cuts later in the year.
For the local stock market, slower growth is a negative for earnings, especially in consumer-facing service industries. Based on how markets reacted to slowing conditions in 2025, we expect some weakness in the **NZX 50**. Traders could consider **buying put options** on the index, or on selected service-sector stocks, as a hedge against a downturn.
We should also watch the New Zealand dollar versus the Australian dollar. Australia’s latest inflation print was slightly higher than expected at **3.7%**, which suggests its central bank may stay hawkish for longer. This policy gap supports a weaker **NZD/AUD**, making it an attractive pair to short.
here to set up a live account on VT Markets now
