Australian Services Sector Shrinks for Eighth Month in November

By Gemma Daley

Dec. 3 (Bloomberg) -- Australian demand for services shrank for an eighth month in November, adding to signs the economy is close to stalling.

The performance of services index declined 4.3 points to 37.8 from October, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. A reading below 50 indicates the sector is contracting.

Reserve Bank of Australia Governor Glenn Stevens yesterday lowered the overnight cash rate target to 4.25 percent from 5.25. percent, extending the biggest round of interest-rate reductions since a recession in 1991. The government has also said it may add to A$25.5 billion ($16.4 billion) in economic stimulus it has announced since Oct. 14.

“More of both might be needed,” said Heather Ridout, the industry group’s chief executive.

Sales, new orders and employment fell to record lows in the index, with all of its sectors declining.

“The growing weakness now evident in the services sector is weighing on the economy more generally,” said John Peters, Commonwealth Bank senior economist. “This data helps foreshadow more aggressive easing in the pipeline.”

Today’s report, which is based on a poll of about 200 companies, is similar to the U.S. non-manufacturing ISM index. It measures sales, new orders, deliveries, inventories and employment for companies such as banks, real estate agents, insurers, restaurants, transport companies and retailers to compile the overall performance of services index.

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net