Australia not out of the woods, figures show
By Tim Colebatch, Economics Editor, Canberra | theage.com.au | 01 September
Newdata has thrown doubt on the strength of Australia's rebound from the global financial crisis.
Corporate profits and stockpiles slumped sharply in the June quarter, while business lending was still going backwards in July. On a day when the Chinese sharemarket staged another spectacular plunge amid growing concerns over the strength of China's recovery, the run of favourable data in Australia hit a hurdle, or several of them, suggesting tomorrow's national accounts might be more subdued than we had expected.
Yet speculation on an early rise in interest rates only increased after real estate monitor Residex reported that house prices jumped 1.1 per cent in July to a record, under the stimulus of first home buyers grants.
Financial markets have now priced in three rate rises in the next six months, the first in November. The Reserve Bank board holds its September meeting today, but is expected to keep rates on hold for now.
The Bureau of Statistics yesterday reported that corporate profits slumped 7.8 per cent in the June quarter after seasonal adjustment. It was their third consecutive quarterly fall, and the steepest yet. The mining industry took the biggest hit, with profits falling 25 per cent as global prices for coal and iron ore slid steeply from their peak.
Profits in wholesale trade fell 12.6 per cent despite the boost to retail sales from the Federal Government's cash splash. The construction industry also had a 6 per cent fall. But in other sectors profits rose. Transport profits climbed 17.6 per cent on top of a 10 per cent rise in March, joining retailing at record profit levels.
But manufacturing and property and business services rebounded only modestly from steep falls.
Year on year, profits in retail trade have risen 21 per cent, thanks to the Federal Government's cash incentives. Transport profits are up 8 per cent, whereas manufacturing profits have slumped 39 per cent, and mining and property and business services are down 20 per cent. Inventories also fell for the third quarter in a row, this time by 3.4 per cent, mostly in wholesaling.
Economists were divided over whether this reflected the unexpected strength of retail demand, or doubts as to whether this level of demand would be sustained. The bureau survey also found that corporate wage bills fell another 1.1 per cent in the quarter as companies pared working hours while keeping staff levels.
Manufacturers' sales fell 1.1 per cent, also their third consecutive quarterly fall. Other data yesterday added their bit of grey to the economic landscape:
■The bureau revised its estimates of import volumes to a 0.2 per cent rise in the June quarter, up from an original estimate of minus 1.9 per cent. Westpac economists warned that the revision would push down tomorrow's GDP figure to a level that was "modest, but still positive".
■The Reserve Bank reported another month of weak credit growth in July. Overall credit rose 0.2 per cent, with business credit down 0.3 per cent while housing credit rose 0.6 per cent.
■The Chinese sharemarket continued its plunge, its benchmark index tumbling 6.7 per cent to 2667.75 points, capping its biggest monthly loss since October. But there was stronger news from India, where June-quarter GDP grew 6.1 per cent year on year, up from 5.8 per cent growth in March. Industrial production climbed 7.8 per cent but analysts warned that poor rains would reduce growth in the second half. China earlier reported annual growth of 7.1 per cent year on year for the June quarter, and Indonesia 4 per cent.
First published by TheAge.com.au on September 01 2009
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