New Zealand's Manufacturing Contracts for Third Time

By Tracy Withers

July 10 (Bloomberg) -- New Zealand's manufacturing industry contracted for the third time in four months in June, adding to signs the economy has slipped into a recession.

The manufacturing index dropped to 45.7 from 47.9 in May, Bank of New Zealand Ltd. and Business New Zealand Ltd. said in a report e-mailed to Bloomberg News today. The index fell to the second-lowest since the survey began in June 2002. A reading below 50 indicates that manufacturing is contracting.

Declining production adds to signs the economy's expansion has stalled as record borrowing costs curb domestic demand and weak global growth hurts exports. The economy contracted 0.3 percent in the first quarter and eight of 13 economists surveyed by Bloomberg News expect it also shrank in the three months ended June 30.

``The first half of 2008 has been the toughest six months manufacturers have had to deal with for some time,'' said Phil O'Reilly, chief executive of Business New Zealand, a Wellington- based employer group.

O'Reilly said 75 percent of comments from manufacturers were negative as they experience the consequences of a slowing domestic economy, weak global growth and rising costs of raw materials.

The overall manufacturing index measures production, employment, new orders, finished stock and deliveries.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.