Construction sector still struggling, Shares jump higher: Economy roundup

Activity in the Australian construction industry has contracted for a 14th consecutive month in April due to the deteriorating economy, but the pace of decline has slowed, according to new survey results.

The Australian Industry Group-Housing Industry Association Performance of Construction index rose 6.2 index points in April to 36.5 points, but is still below the 50-point level separating expansion from contraction.

“The continued weakness in industry conditions was linked by most firms to the deteriorating economy and shortages of working capital, which had resulted in clients delaying tenders, and in some cases cancelling planned project developments,” the report said.

Australian Industry Group associate director of economics and research Tony Pensabene said in a statement that the rate of decline is “easing”.

“There’s some hope that the downturn in the housing sector may be bottoming out, with new orders declining at a less rapid rate.”

The Australian sharemarket has opened higher today on positive results from Wall Street overnight and good results from the mining industry on higher commodity prices.

The benchmark S&P/ASX200 index was up 81.5 points or 2.11% to 3948.6 at 12.05 AEST. The Australian dollar also opened higher today at US74.8 cents.

Westpac shares gained 2.3% to $20.41, while NAB jumped 1.9% to $22.28. AMP lost 0.4% to $5.47 as Wesfarmer gained 2.2% to $22.75.

News Corp shares gained 9% to $14.49, despite the company announcing a 47% drop in operating profit to $US755 million due to falling advertising revenue. Net profit remained at $US2.7 billion for the third quarter.

In the United States, Wall Street rose on hope that the unemployment rate may be set to decline, according to a survey from ADP Employer Services. The Dow Jones Industrial Average jumped 101.63 points or 1.21% to 8512.28.

Meanwhile, the Obama Administration is set to release the results of “stress tests” it has conducted on 19 major US banks by early tomorrow morning AEST.

The US Government will also determine how much capital the banks will need to meet new Government-mandated targets, and that any bank needing capital will have until 8 June to develop a plan.

“The US Government reaffirms its commitment to stand firmly behind the banking system during this period of financial strain to ensure it can perform its key function of providing credit to households and businesses,” US Treasury and regulators said in a joint statement.