Consumer sentiment surprise, oil price slides: Economy roundup

Here’s a shock: Despite a slowing economy, spreading job losses and news that retail prices are about to go through the roof, consumers are actually a little happier.

Here’s a shock: Despite a slowing economy, spreading job losses and news that retail prices are about to go through the roof, consumers are actually a little happier.

The Westpac-Melbourne Institute Index of Consumer Sentiment rose 4.3% to 85.5, up from 82 in October. Westpac chief economist Bill Evans says the result is due to interest rate cuts, the Government’s upcoming stimulus package, and a 12.5% drop in petrol prices.

“However, we should not get too excited about this rise,” he says.

“Despite all the ‘good’ news, the index is still 22.6% below last year’s level, and 14.5 index points below the level where optimists and pessimists are in equal numbers.”

Evans also says the Reserve Bank is likely to continue its string of interest rate cuts, with a 0.75% cut likely to occur at its next meeting on 2 December.

But Australian investors weren’t feeling as positive, with the local sharemarket falling 1.4% in early morning trade following Wall Street losses overnight.

The Dow Jones Industrial Average fell 1.99% overnight, with a string of poor company results dampening the mood of investors. Among the worst performers was coffee giant Starbucks, which posted a 97% fall in profit in the September quarter.

Back in Australia, the benchmark S&P/ASX200 index was down 43.9 points or 1.1% to 3917.0 at 12.15pm AEDT.

The best performing stock on the market was infrastructure operator Asciano, which has jumped 19% in early trade after a yesterday’s disastrous results, when its share price plummeted 60% on analyst concerns about its rising debt levels and profitability.

Meanwhile, oil has dropped 5% to $US59 a barrel – the lowest level since March 2007. Lower demand has seen oil prices drop from a peak of $US147 a barrel in July. That should keep the smiles on the dials of consumers for a little while – Alan Kohler says the decline indicates petrol prices will continue to fall.

In technology news, IT strategy group Data#3 have said it’s “on track” for a better 2008 half year result. Check out the SmartCompany Dun & Bradstreet Industry Growth List – on which Data#3 ranked 17th – to see how Australia’s fastest-growing IT companies are tracking.