More good news for the economy arrived this morning, after it was announced the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months in the future, was 1.7% in August.
The figure is an increase of 8.6 points from the -6.9% result recorded in May, but still below the long-term trend of 2.8%. Westpac chief economist Bill Evans said in a statement the result is “remarkable”.
“In the recovery in 1990/91 the growth rate improved by 4.5 ppt’s over nine months and in the 1982 recovery the growth rate improved by 6.6 ppt’s over six months. Growth increased from -0.9% in 1991 to 3.9% in 1992 while it accelerated from -2.5% in 1982 to 3.6% in 1983.”
“The current sharp improvement in the growth rate of the Leading Index strongly supports the view that the Australian economy is moving onto a much stronger growth trajectory in 2010.”
Evans said the figures are supportive of Westpac’s forecast that GDP growth will increase from this year’s 1.5% to 4% during 2010.
“The components of the Index that explain the sharp improvement in the growth of the Leading Index from its low point in May of -6.9% to the August print of 1.7% are: domestic labour market conditions (2.4 ppt’s); US industrial production (2 ppt’s); share prices (1.3 ppt’s); corporate profits (1.3 ppt’s); dwelling approvals (0.9 ppt’s); manufacturing prices (0.6 ppt’s); and productivity (0.6 ppt’s).”
Additionally, new figures from the Australian Bureau of Statistics show the seasonally adjusted estimate for sales of new motor vehicles increased by 2.9% compared to August.
All vehicle types increased when compared to the previous month, with sales of sports utility vehicles rising 2.6% and passenger vehicles rising 1.6%.
BHP posts record iron ore output
Meanwhile, BHP Billiton has posted a record iron ore output during the first quarter, with production rising 1% to 30.106 million tonnes in the three months ending 30 September.
Production was also 11% higher from the end of June, with the company saying the increased activity is due to improved performance in the WA iron ore operations.
“Production hit an all time high due to the successful delivery of projects in the deepwater of Gulf of Mexico (in the US) and Western Australia over the past two years,” the company said in a statement.
“Operational performance was steady and benefited from the absence of weather related interruptions. This was partly offset by natural field decline.”
Meanwhile, the Australian sharemarket has opened lower today after Wall Street stocks fell on disappointing economic data, despite a continuation of surprising corporate results.
The benchmark S&P/ASX200 index was down 10.5 points or 0.22% to 4835.7 at 12.05 AEST. The Australian dollar remained steady at US92c.
Commonwealth Bank shares fell 1.1% to $54.29, while NAB shares dropped 0.9% to $31.03. ANZ lost 0.3% to $23.72 as Westpac lost 0.1% to $26.45.
Engineering company Downer EDI has launched a four-year bond issue of at least $100 million, with the offer jointly managed by NAB, UBS and Westpac.
The company has not released any pricing details but a fund manager has told Reuters that the company expects the offer to pay 375 basis points. The offer will be guaranteed by Downer EDI.
Virgin investigates aircraft safety problems
Virgin Blue has denied any wrongdoing regarding safety precautions as investigators continue to determine how a wheel on an aircraft broke during a touchdown in Melbourne.
Steve Purvinas, Australian Licensed Aircraft Engineers Association (ALAEA) federal secretary, told AAP yesterday the incident caused by a faulty wheel assembly posed an unacceptable risk.
“It’s fortunate that today’s incident did not result in any serious injury, but it demonstrates the urgent need for safety inspections across all Virgin’s planes,” he said.
Meanwhile, coal miner Peabody Energy has announced it will double exports from Australia over the next five years as it looks to expand its Asian operations.
The company’s third-quarter revenues for Australia averaged about $US82 per tonne, a 33% increase over the second quarter for realised prices.
Also in the US, stocks on Wall Street fell due to new economic data that showed new construction of homes grew less than expected in September, while produce prices also declined. The Dow Jones Industrial Average fell 50.71 points or 0.5% to 10,041.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
