Consumer confidence has jumped by 1.9% in February, the latest Westpac-Melbourne Institute consumer sentiment index has revealed, with improving conditions in Queensland contributing much of the improvement.
Westpac economist Bill Evans said in a statement this morning that much of the 5.7% fall in January’s result was due to the floods, and as conditions have improved, consumer confidence has subsequently risen.
“We can best describe the result in February as a modest rebound from the strong reaction to the floods in January. This rebound may have been stronger had it not been for the Cyclone Yasi which dominated the news during the week of the February survey,” Evans said.
There were other positive contributions, with the RBA holding off on raising interest rates and unemployment falling to 5%, the lowest point since January 2009.
However, despite the “modest rise”, Evans points out the index is still 8.9% below where it was at this time last year.
The outlook for the economy over the next 12 months improved by only 1.1%, and the five year outlook grew by 10.2%. Evans says this may be because households were encouraged by the decision to fund rebuilding programs out of other areas, reducing the likelihood of falling into deficit.
But Evans also says that retailers must be “perplexed” by the resilience of the “time to buy a major household item” component, which has averaged 141.5.
While sales of household goods have actually been weak, Evans says people are saying it is a good time to buy due to low prices, but then actually refrain from doing so because of high debt levels.
Evans says that at the next RBA meeting on March 1, interest rates “are almost certain to remain on hold”.
The Commonwealth Bank has recorded a 13% increase in first-half profit to $3.3 billion, but warns it is still cautiously optimistic about the year ahead.
The company said statutory net profit was up by 5% to $3.05 billion, with cash earnings per share up by 12% to 214.3 cents.
Despite the positive result, chief executive Ralph Norris said in a statement there are still challenges facing the bank and the sector as a whole.
“While the Australian economy continues to perform well and other advanced economies are showing signs of improvement, the domestic banking industry still faces a number of headwinds,” CBA chief executive Ralph Norris said in a statement.
“Underlying credit growth remains subdued with both consumer and corporate confidence fragile. Competition is intense with depositors benefiting from historically high margins while wholesale funding costs also remain at elevated levels.”
CBA said housing credit is expected to grow between 7-9% this year, and business credit will grow by 1-3%. It also said its Tier 1 capital ratio rose by 56 basis points to 9.71%, and bad debt charges dropped 48% to $722 million.
The Australian sharemarket has opened higher today after a solid night on Wall Street, where positive financial results have kept a rally continuing for five days.
The benchmark S&P/ASX200 index was up by 13 points or 0.29% to 4904.3 at 12.15 AEST, while the Australian dollar maintained its position at $US1.01c.
AMP shares dropped 0.9% to $5.47, while Commonwealth Bank shares fell 1.8% to $54.88. Westpac rose 1.4% to $23.99 and ANZ shares gained 1.9% to $24.88.
Stockland underlying profit grew by 14% to $380.3 million in the first half of the year, the company announced, pushing its shares up 3.5% to $3.85.
Statutory net profit was $425.1 million for the six months ending December 31, with strength in the commercial property sector bolstering growth, the company said.
However, it also warned that interest rate hikes will hurt housing affordability and negatively affect the market.
Gloves and condom manufacturer Ansell has increased its profit by 4.5% in the first half of the year to $64.2 million, although it says it anticipates more pressure from material prices.
“We anticipate further pressure from raw material price increases,” Ansell said in a statement.
“Ansell is continuing its programs to mitigate this impact and the strong global momentum in the industrial and SH&WB (sexual health and wellbeing) businesses are expected to provide a favourable offset.
Stocks on Wall Street have risen for a fifth day but the slight gains have given investors little hope that a rally can be sustained any further. However, good results from retailers, including McDonald’s, indicate that higher results may be seen again this week.
The Dow Jones Industrial Average was up by 71.52 points or 0.59% to 12,333.15.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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