The bad news for the construction industry continues, with industry activity contracting for an 11th consecutive month in January, due to delays caused by lack of credit.
The Australian Industry Group/Housing Industry Association performance of construction index jumped 3.2 points to 34.1 in January, but is still below the 50 point level separating expansion from contraction.
“January was another poor month for the construction industry, with the relentless pressures of tight credit conditions and deteriorating economic sentiment driving a further decline in activity,” said Tony Pensabene, AIG’s associate economics and research director.
“We are continuing to see weakness on a broad industry front, with intense competition for contracts with many firms reporting clients are either scaling back or deferring planned project developments.”
Meanwhile, the Reserve Bank has officially trimmed its growth forecasts for the Australian economy. It is now expecting GDP will grow by just 0.25% by the end of the second quarter of this year, rising to 0.5% at the end December and 1.25% by the June quarter of 2010.
“While the international situation is likely to remain difficult for some time, the combination of expansionary monetary and fiscal policies now in place will help to cushion the Australian economy from the contractionary forces coming from abroad,” it said.
National Australia Bank has recorded first quarter earning of $1.1 billion, but has also been struck with an $824 million charge for bad debts.
“The specific provision charge was $521 million, approximately half of which related to three individual name exposures. The collective provision charge was $303 million, mainly reflecting a decline in customer credit ratings across all businesses.”
The bank says the earnings result is pleasing despite deteriorating economic conditions, and that revenue remains strong. But it forecasts a dire year ahead.
“Economic conditions deteriorated during the December quarter, resulting in a slowdown in system credit growth with further weakness expected over the remainder of the 2009 financial year,” NAB says.
ANZ says its first half profit, after credit risk and provisions, should be more than 15% lower but argues it is much too soon to give reliable guidance figures.
The bank, the country’s third biggest lender, also says its first half net profit is expected to be “modestly higher”.
Despite the bad financial news, the Australian sharemarket has opened 1.27% higher today after positive leads from Wall Street overnight.
The benchmark S&P/ASX200 index was up 24 points or 0.73% to 3453.5 at 12.10 AESDT. The dollar lost ground to US64 cents.
BHP Billiton shares gained 2% to $32.26, while Commonwealth Bank rose 1.7% to $29.46. NAB shares fell 1.1% to $18.44, while Newscorp dropped 5.3% to $10.53 after news the group suffered a $10 billion second quarter loss.
Overseas, the Bank of England has cut interest rates to help bring Britain out of recession, while the European Central Bank kept its main rate on hold at 2%.
The Bank of England cut its base rate by 50 basis points to just 1% – the lowest point since the creation of the central interest rate since 1694.
Wall Street closed higher after optimism the Government will help support the troubled financial system. The Dow Jones Industrial Average closed up 105.69 points or 1.33% to 8,062.35. Oil prices also rose in anticipation of the Obama Administration’s stimulus package, moving up to $US41 a barrel.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
