Unemployment rate rises to 5.3% in July, Myer sales slip: Economy Roundup

The unemployment rate has unexpected risen by 0.2% in July to 5.3%, official figures from the Australian Bureau of Statistics reveal today.

The data is something of a surprise, given most economists expected the jobless rate would stay at 5.1%. However, total employment actually grew by 23,500, more than the 20,000 forecast.

The number of people looking for full-time work increased by 17,300 to 449.300, with the number of people looking for part-time work increasing by 7,300 to 182,500.

The participation rate, which reflects the percentage of people actually in work or actively looking for work, moved up to 65.5% from 65.2% earlier in June.

Meanwhile, department store Myer has confirmed the volatility of the retail market, saying conditions in the fourth quarter remained tough as retail shoppers back away. However, it still forecasts high full-year earnings before interest and tax of between $265-272 million.

Sales for the fourth quarter were down 1.4% from the previous corresponding period to $815.8 million, with full-year sales up just 0.7% to $3.28 billion.

“The trading environment during the fourth quarter continued to be very challenging, characterised by fragile consumer confidence on the back of successive interest rate increases and global economic uncertainty,” chief executive Bernie Brookes said in a statement.

He added seven new stores are operating under a new POS system and that the rollout over all stores will be completed by Christmas.

“Other major projects including further refinement of our merchandise offer, refurbishments, and the exciting rebuild of our flagship store at Myer Melbourne are on track and progressing well.”

Qantas has recorded underlying profit before tax of $377 million, over triple the previous corresponding figure, but the company says more volatile conditions will impact future statements.
The airline also points out statutory profit after tax fell by 4.3% to $112 million for the 2010 financial year, with sales and other income dropping 5.4% to $13.7 billion.

Chief executive Alan Joyce said trading conditions could be stronger than the first half of the year, but fuel prices, exchange rates and the general economic environment could very well impact future earnings statements.

“It is therefore not possible to provide a more specific forecast at this time given volatility and uncertainty of the aviation market,” Joyce said in a statement.

The company’s freight division performed well, he said, and capacity should improve over the next six months by 9.6% as more travellers head overseas.

“International demand and yield across the business and leisure sectors continue to improve and domestic demand is also strengthening. The domestic leisure market continues to be highly competitive; however we expect this too will improve in the first half of the year.”

Earnings before interest and tax were at $67 million, while Jetstar’s EBIT was at $131 million, up from $107 million.

Sharemarket dragged down by Wall Street

The Australian sharemarket has opened lower this morning after Wall Street stocks fell due to another economic downgrade by a major English bank.

The benchmark S&P/ASX200 index was down 62 points or 1.4% to 4392.9 at 12.15 AEST, while the Australian dollar moved down under US89c after the sell-off in the United States.

ANZ shares lost 1.3% to $21.90, while Commonwealth Bank shares have lost 1.2% to $50.59. Westpac fell 1.5% to $22.09 as AMP also declined 1.7% to $5.29.

Coca-Cola Amatil has recorded a 12.1% increase in net profit to $212.7 million, saying it hopes to increase earnings in the “high single digit” range over the next year.

Earnings before interest and tax was up 10% to $373.8 million, with revenue up 4.4%, trading revenue up 4% and volume up by 1.8%.

“Cycling the very strong first half of 2009 in Australia was always going to be challenging, so to deliver volume growth of 1.5%, with revenue growth of 5.5%, was a very good outcome,” group managing director Terry Davis said in a statement.

“In the year to date, I am pleased that the strength of our business model in effectively balancing pricing, volume growth and market share has provided the platform to improve our profitability and market position in each of our territories.”

However, like other major companies announcing their results today, Davis remains cautious regarding the economic outlook over the next year.

“I still remain a little cautious about the overall retail demand outlook in Australia, although recent good news about a pick-up in consumer sentiment certainly seems to have improved demand for our beverages over the last 30 days.”

“Not surprisingly, we also have a number of cost-out initiatives coming through which will help underpin the guidance for the second half.”

Transurban Group has increased its net profit by a staggering 341.8% to $59.61 million, saying a number of fully-funded projects help bring it over the line. In a statement, it said projects in the US and on Australia’s east coast will help next year’s figures.

“Substantial progress was also made on Transurban’s development projects in the Sydney market in the year to 30 June 2010. In-principle agreement was reached with the NSW state government on the M2 upgrade and Transurban worked with Interlink Roads to reach an initial agreement for the widening of the M5. Negotiations continue on both projects with a view to reaching financial close in the current financial year,” the company said.

James Hardie Industries SE recorded a net profit of $US104.9 million in the quarter to June 30, with net operating profit at $US40.5 million.

“The recovery in the US residential housing market remains disappointing and fragile,” James Hardie chief executive officer Louis Gries said in a statement.

“Following the expiry of the US government tax credit incentives at the end of April 2010, the gradual recovery of US residential construction, which had been apparent in the first four months of calendar 2010, stalled.”

Back home, Westpac has appointed Rob Chapman, head of BankSA, to take over St George once current chief executive Greg Bartlett retires in December.

“The Westpac/St George merger has exceeded our already high expectations, and this is in no small part due to Greg’s efforts,” Westpac chief executive Gail Kelly said.

Inflation expectations drop, survey shows

The Melbourne Institute of consumer inflationary expectations found the median expected inflation rate dropped to 2.8% in August down from 3.3% in July – the fourth consecutive month of declines.

The result comes after the Reserve Bank of Australia kept rates on hold last week, following official inflation data released last month which showed inflation was still within the 2-3% target band.

Overseas, Wall Street stocks have fallen after the Bank of England downgraded economic expectations for Britain, while investors are still wary of the Fed’s plan to buy more troubled mortgage debt from the US Government.

The Dow Jones industrial average was down 265.42 points, or 2.49%, to 10,378.83.