By Tracy Withers
Jan. 22 (Bloomberg) -- New Zealand’s manufacturing industry shrank for the eighth month and spending on credit and debit cards fell in December, adding to signs the economy remained mired in a recession in the fourth quarter.
The performance of manufacturing index was 42.5, compared with 35.2 in November, Bank of New Zealand Ltd. and Business New Zealand said in Wellington today. A score below 50 shows manufacturing is contracting. Card spending dropped 0.5 percent from the previous month, a Statistics New Zealand report showed.
New Zealand’s economy has been in a recession since the first quarter of 2008 as a drought and a housing slump stalled domestic demand before the global credit crisis exacerbated the decline. Prime Minister John Key last week said the economy will be at a stand-still in 2009 as the world recession reduces exports and prompts companies to fire workers.
“Spending may have held up better than we thought but construction, manufacturing, distribution are all contracting,” said Craig Ebert, a senior markets economist at Bank of New Zealand in Wellington. “We are going to have another negative quarter” for gross domestic product in the final three months of 2008, he said.
New Zealand’s currency fell to 53.10 U.S. cents at 12:46 p.m. in Wellington from 53.46 cents before the reports were released. The NZX 50 stock index rose 0.8 percent to 2,727.83.
The latest forecast for the economies of New Zealand’s 12 largest trading partners is that they will be unchanged in 2009, Ebert said. In 1991 and 1998, when New Zealand was last in a recession, trading-partner growth stayed positive, he added.
Record Low
The manufacturing index’s level in December was the second- lowest score since the series began in 2002. November’s index reading was the record low.
“The upswing in the December result shouldn’t be interpreted as a potential path for recovery in manufacturing,” said Phil O’Reilly, chief executive officer at Business New Zealand, a Wellington-based employer group.
Consumer spending on credit and debit cards fell for a second month as fuel purchases dropped, the statistics agency said. Transactions excluding fuel, workshop and vehicle sales gained 0.2 percent from November.
Economists use the report as a leading indicator of retail sales, which were unchanged in November after falling 1.3 percent in October.
Both the retail sales and card spending figures aren’t adjusted for price movements. Retail sales excluding inflation probably fell for a fourth consecutive quarter in the three months ended Dec. 31, Bank of New Zealand’s Ebert said.
Income-tax cuts, cheaper gasoline and lower interest rates have provided some relief for consumers, though the prospect of rising unemployment will damp spending in the months ahead, he said. “There’s nothing out there to prompt people to go on a spending binge.”
Key last week said New Zealand’s unemployment rate may climb to 7 percent this year as the economy stalls. The jobless rate was 4.2 percent in the third quarter.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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