The Westpac-Melbourne Institute Leading Index, which forecasts the likely pace of economic activity three-to-nine months in the future, was -3.5% in April, “well below” the long term trend of 2.8%.
But Bill Evans, Westpac chief economist, says the result is a “significant improvement” from the -5.1% result recorded during March.
“However, bear in mind that the February read was the lowest since 1982. [The index’s] current pace is still consistent with the Australian economy contracting in the June and September quarters, but if this rate of improvement in the growth rate continues we can look to positive growth in the first half of 2010.”
Evans said today’s result suggests that the economy, “while likely to contract in the near term”, is also likely to enter a period of modest growth.
“However rising unemployment, higher fixed interest rates and likely economic disappointment offshore will continue to make the case for more rate cuts in Australia.”
The Australian share market has opened lower for a second consecutive day after disappointing economic data in the US brought down Wall Street overnight.
The benchmark S&P/ASX200 index was down 47.8 points or 1.21% to 3914.7 at 12 noon AEST. The Australian dollar also slipped back to just US79 cents.
Commonwealth Bank shares jumped 1.3% to $37.60, while ANZ lost 0.7% to $16.69. Westpac lost 1.5% to $19.57 while AMP gained 0.8% to $5.10.
Asciano shares have dropped 29% to $1.29 today despite the company raising $350 million extra in a $2.35 billion capital raising.
“In response to strong demand from institutional investors, Asciano also announces that the total underwritten issue size has been increased from $2 billion to $2.35 billion,” the company said.
The company said that the proceeds will be used to pay down the company’s debts, which currently stands at about $4.9 billion.
Dwelling commencements dropped by a seasonally adjusted 4% in the March quarter, according to the Australian Bureau of Statistics, reaching an annual decline of 22.5%. Private homes dropped 4.1% over the quarter, and private units fell by 6.6% for the quarter.
New construction contracted by 6.3%, while QLD and NSW suffered the biggest declines at 6% and 7.2% respectively.
Meanwhile, mining giant Rio Tinto has said the outcomes of iron ore price negotiations with Chinese customers are unknown, but any outcomes will have an effect on the company’s profitability next year.
“The group expects to continue to sell a significant proportion of its iron ore on the spot market at least until the group has settled the benchmark prices,” Rio Tinto said yesterday.
The country’s largest investment bank, Macquarie Group, has said it has delayed a shareholder’s vote on new remuneration packages for senior employees and executives.
“Macquarie is currently in the process of finalising its 2009 Notice of AGM and as at the date of this announcement, the proposed legislative changes have not been finalised,” the company said.
“Macquarie will defer implementation of its proposed remuneration changes and, accordingly, will not seek shareholder approval of the proposed changes to its remuneration arrangements at Macquarie’s 2009 AGM.”
In the US, Wall Street dropped due to pessimistic economic data and disappointing sales results from electronics retailer Best Buy. The Dow Jones Industrial Average fell 107.46 points or 1.25% to 8504.67.
But good news came in the property sector, where new data from the Commerce Department showed housing starts increased by 17.2% in May to an annual rate of 532,000 units, the biggest increase in three months.
The new data also showed that new single family starts jumped 7.5%, the largest increase since January 2006.
Meanwhile, the Obama administration has announced plans to merge two banking regulation agencies and create a watchdog agency that will focus on consumer financial products.
A congressional aide has told Reuters that the Office of Thrift Supervision will merge with the Office of the Comptroller of the Currency, with a briefing given by Treasury Department officials outlining the changes.
President Barack Obama will reportedly unveil the new proposals later tonight.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
Comments