Inflation gauge falls 0.1% in July, Manufacturing sector grows: Economy roundup

A private gauge of Australian inflation slowed during July, adding more weight to suggestions the Reserve Bank will keep the official interest rate at 4.5% at tomorrow’s meeting.

The TD Securities-Melbourne Institute revealed today its consumer price inflation gauge rose 0.1% in July, down from June when it rose by just 0.3%. The annual pace of inflation slowed to 2.8%, within the RBA’s 2-3% target band.

The data comes after official figures revealed a slowdown in annual underlying inflation to 2.7%.

“The soft CPI report allows the RBA to remain on hold for several months as mortgage lending rates have already been restored to average levels,” Annette Beacher, a senior strategist at TD Securities, said in a statement.

The inflation gauge reveals utilities, health services and alcohol and tobacco prices all rose, but they were offset by declines in food, holiday travel and petrol, which actually dropped by 2%.

Meanwhile, Australian manufacturing activity increased in July with new orders and output both expanding, although employment has declined.

The Australian Industry Group-PriceWaterhouseCoopers performance of manufacturing index rose by 1.5 points to 54.4 during July, above the 50-point level separating expansion from contraction.

“The recovery in manufacturing continued in July despite the waning impacts of fiscal stimulus and above-normal business interest rates,” AIG chief executive Heather Ridout said in a statement.

“Private sector demand is slowly re-emerging as a source of growth,” she added. “While Australia remains the stand-out economy globally, the environment is also patchy and volatile and the world economy faces renewed uncertainty.”

The measure of production rose 3.8 points to 57.3, while new orders rose 5.5 points to 56.7. Selling prices fell 0.7 points to 46.6, while manufactured exports are continued to be constrained.

Meanwhile, Downer EDI has appointed Grant Fenn as managing director and chief executive following the resignation of Geoff Knox.

“We recruited Grant not only for the breadth of his financial, strategic, operational and leadership skills, but also as a potential future chief executive officer,” chairman Peter Jollie said in a statement.

Fenn also confirmed full-year net profit will be about $3 million, with net profit to be about $194 million, which is in line with the market’s expectations.

Share market opens slightly higher

The Australian share market has opened slightly higher today on the back of a fairly flat lead from Wall Street late last week.

The benchmark S&P/ASX200 index was up by 43 points or 0.96%, to 4536.6 at 12.15 AEST, while the Australian dollar continued to remain high at US90c.

Commonwealth Bank shares were up 1.4% to $53.32, while NAB shares gained 0.8% to $25.34. Westpac rose 0.7% to $24.15 as ANZ also lifted 0.7% to $23.20.

Premier Investments said it expects the Just Group retail business to record an annual profit of between $78-81 million, with improvements expected over the next year.

The Just Group includes brands such as Just Jeans, Jay Jays, Portmans, Jackui E and Peter Alexander.

In a trading update issued today, the firm said the second half of the 2010 financial year had been extremely volatile, and several improvements had failed to translate to the company’s overall performance.

Sales are up by 3% for the year to $870 million, with EBITA to be between $82-86 million.

“The directors anticipate a challenging first quarter, with continuing improvement in the second quarter and significant improvement in the second half as the business cycles the abnormal retail environment of the second half of 2009-10,” the company said in a statement.

Aevum has rejected an unsolicited proposal from real estate group Stockland worth over $266 million.

“The Aevum board has carefully considered Stockland’s unsolicited and opportunistic proposal and believes that it significantly undervalues Aevum,” chairman Graham Lenzer said in a statement.

Shares in Sigma Pharmacueticals have jumped over 5.5% this morning, following a report in The Age suggesting Watson Pharmaceuticals is looking to bid on its generics business.

The publication reports Watson will make a bid of about $600 million, putting it up against South African Aspen Pharmacare and its $648 million bid.

Argo records profit increase of 21%

Investment group Argo Investments has recorded a 21% rise in unaudited net profit to $153.9 million, although operating profit has been down 12.6% over the year to $142.8 million.

“We expect to see modest growth in Australian corporate profits and dividends in the period ahead, despite continuing economic and political uncertainties, both locally and internationally,” managing director Rob Patterson said in a statement.

In the mining sector, Xstrata workers are on strike over a pay dispute at the company’s Queensland Collinsville mine.

“We still have sufficient stockpile at the moment to meet our shipping schedule. We have kept our customers informed. We haven’t had to declare force majeure, though we may be forced to if the strike drags on,” Xstrata spokesman James Rickards told Reuters.

The company is currently negotiating with the Construction, Forestry, Mining and Energy Union.

In the United States, investors are awaiting a volatile week with jobs data and a slew of company financial results expected over the next few days, although confidence is already shaken due to disappointing GDP figures.