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Services industry shrinks for eighth month

Monday 15th December 2008

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New Zealand's services industry contracted for an eighth month in November, with new orders slumping to a record low amid signs the weaker world economy is contributing to an prolonged domestic slump.

The Bank of New Zealand - Business NZ Performance of Services Index (PSI) fell to 47.3 in November from 48.7 in October. It reached a record low of 45.6 in June. A reading below 50 indicates a contraction.

Figures next week are expected to show the economy contracted 0.4% in the third quarter, extending the first recession in a decade, on weak housing investment and consumer consumption. The PSI follows a record slump in the Performance of Manufacturing Index.

"Corporate New Zealand is, in aggregate, getting well and truly beaten up by a combination of reduced demand and margin pressure," said Stephen Toplis, head of research at BNZ.

Within the PSI, four of the five diffusion indexes contracted last month. Activity/sales slipped to 45.7 from the previous month, while employment edged higher to 49.5. New orders slumped to a record low 45.9 and deliveries fell to 46.6. Stocks/inventories fell, while remaining in positive territory at 51.1.

The jobless rate rose to 4.2% in the third quarter from 3.9%.

By Jonathan Underhill

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