The Westpac-Melbourne Institute Index of Consumer Sentiment increased by 3.3% during October, due in part to the Reserve Bank’s decision to keep rates on hold for another month. In a statement, chief economist Bill Evans said the result was “solid…and in line with our expectations”. The level of the index is now around 2.5% above the average for 2010, and about 15% above the low point of the year.
The decision by the Reserve Bank to keep rates on hold at the October Board meeting would have buoyed consumers. Press speculation was very strong that rates were about to rise with the possibility of “top ups” from the banks.
Since the last survey the Australian dollar has surged by 6½%. There continues to be ample media speculation it will reach parity with the USD. Finally, there is ongoing evidence of improving employment conditions with a further 49,500 new jobs being reported for September.
However, Evans also points out some aspects of the survey were subdued, leading to a “mixed” result”. The economic outlook for the United States and Europe continue to weight on consumers’ minds, he says, and “prospects for house prices are also deteriorating”.
“These contrasting effects might explain the divergence in the components of the Index. The two components of the Index that cover respondents’ assessments of their own finances were actually down. The index measuring responses to “family finances compared to a year ago” fell by 0.8% while the index tracking expectations for finances over the next 12 months fell by 3.8%.”
Expectations for economic conditions over the next 12 months increased by 7.6% following a 7.2% drop in September, with five-year expectations up by 1.4%. The component for households keen on purchasing major household items increased by 9.9%, and is at its highest level in five years.
Evans also said the bank was “surprised” the RBA kept rates on hold in October, and adds that with interest rates still above the contractionary zone and unemployment likely to fall through 5% by the end of the year, “another rate hike is likely”.
While he says the RBA may keep rates on hold due to the high Australian dollar and weakened credit, “we expect the Bank will announce a 25 bp increase in the overnight cash rate following the board meeting on 2 November”.
Electronic retailer JB Hi-Fi has said total sales for the first quarter of the 2011 financial year are up 12.2% on the same time last year, but are still 5% below budget. Chief executive Terry Smart says the businesses will make it up in the second half.
“The company expects to make up part of this shortfall in the second half, which is cycling less challenging comparable store sales,” he said at the company’s AGM.
“The overall strength of the economy, low levels of unemployment and a strong product assortment should underpin a successful Christmas trading period.”
Smart also said the company is satisfied with the performance of 12 new stores opened since the start of the financial year, and is still on track to meet the guidance of 18 new stores for the year to June 2011.
The Australian sharemarket has opened higher today after a solid night on Wall Street, where stocks rose due to speculation the Federal Reserve will soon announce initiatives to help prop up the American economy.
The benchmark S&P/ASX200 index was up 14 points or 0.32% to 4632.8 at 12.10 AEST, while the Australian dollar was trading at about US98.7c.
AMP shares gained 1% to $5.24, while ANZ moved up 0.1% to $23.85. Telstra shares gained 0.4% to $2.85 as Woolworths lost 0.1% to $28.96.
Australian Competition and Consumer Commission chairman Graeme Samuel has told Business Spectator that he does not think there is a need for a cost-benefit analysis of the National Broadband Network.
He argues Australia has invested in other areas with no calls for cost-benefit analysis reports.
Global marketing services group WPP has appointed former Telstra chief executive Sol Trujillo to the company’s board as a non-executive director.
“Sol Trujillo is a highly experienced international business executive, who brings 30 year of international business experience to the board, having served as a chief executive officer on three continents in media communications organisations,” the firm said.
Chip manufacturer Intel has recorded stronger-than-expected third-quarter results, reporting net profit of $US2.95 billion, compared to $US1.86 billion in the previous corresponding period.
The company also forecast revenue of $US11-11.8 billion for the last quarter of the year. Revenue for the most recent quarter, which ended on 25 September, came in at $US11.1 billion.
The company has been in recovery mode over the past year, following the global financial crisis during which the IT industry suffered from a drop-off in sales.
In New York, the Dow Jones Industrial Average gained 10.06 points or 0.09% to 11,020.40.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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