Australian Services Sector Shrinks for Ninth Month in December

By Jacob Greber

Jan. 6 (Bloomberg) -- Australian demand for services shrank for a ninth month in December, adding to signs the economy may stagnate this year.

The performance of services index rose 1.5 points to 39.3 from November, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. A reading below 50 indicates the sector is contracting.

Increasing evidence that the economy may stall in 2009 may prompt Reserve Bank of Australia Governor Glenn Stevens to add to the most aggressive round of interest-rate cuts since 1992 when he next reviews the benchmark interest rate on Feb. 3. A separate report published last week showed manufacturing contracted for a seventh month in December.

“Australia’s services sector begins 2009 facing extremely tough business conditions,” said Heather Ridout, the industry group’s chief executive. “Of particular concern is the continued decline in new orders and supplier deliveries.”

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 for this story: Jacob Greber in Sydney at jgreber@bloomberg.net