Consumer confidence surges: Economy roundup

The Westpac-Melbourne Institute index of consumer sentiment has jumped to a 16-month-high of 100.1 on the back of a 12.7% increase, the biggest monthly rise in 22 years. “This is a truly remarkable result,” Bill Evans, chief economist at Westpac, said in a statement. “It is the second-largest recorded increase in the index since the survey began in 1974 and the largest increase in the last 22 years.”

Evans said the big jump was mainly due to the fact Australia’s economy managed to avoid slipping into a technical recession last week.

He said the result gives the Reserve Bank of Australia more reason to keep the official interest rate at 3%, and that the result is associated with the 0.4% GDP growth result seen last week.

While the results showed that families are more optimistic about their personal finances, the result showed caution on the part of families on whether major household items should be bought, with that index dropping 1.6%.

“That is a major qualification of the reliability of this movement in the index for predicting consumer spending,” said Evans.

Meanwhile, new Australian Bureau of Statistics figures show the total value of dwelling finance commitments excluding alternations and additions jumped by a seasonally adjusted 3.6% in April.

Investment housing commitments also increased by 8.9%, with owner occupied housing commitments up 1.9%.

The Australian share market opened higher today on the back of higher commodity prices on Wall Street overnight. The benchmark S&P/ASX200 index was up 67.1 points or 1.71% to 4002 at 12.08pm AEST. The Australian dollar also increased to US80 cents.

NAB shares gained 1.4% to $22.01 as ANZ gained 1.5% to $16.65. Commonwealth Bank jumped 1.5% to $37.53, while JB Hi-Fi also gained 6.5% to $15.09 after its profit upgrade announcement yesterday.

In a new report from Access Economics, the forecaster claims that retailers are facing a harsh 18 months ahead as unemployment continues to rise and stimulus package payments are spent away.

Access said that only 25% of the $21 billion in cash payments from the Government had been spent so far, which gives retailers some hope, but economic conditions continue to worsen.

“The cash is out of the bag, so to speak, and the tide has certainly turned on this type of stimulus spending … retailers are unlikely to see any further gifts from the government,” Access director David Rumbens told AAP.

“Interest rates remain at very supportive levels and could go lower, but a sharply rising unemployment rate, weak consumer confidence, and house prices in trouble amid weak debt levels, will certainly dampen the retail sales outlook.”

In the US, Wall Street dropped on the news that major banks will repay funds given to them by the Government, earlier than expected by some analysts. The Dow Jones Industrial Average dropped 1.43 points or 0.02% to 8763.06.

But the S&P500 index gained 3.29 points, or 0.35%, to 942.43 after Texas Instruments shares jumped 6.3% to $US21.02, signaling a possible recovery in the computer chip manufacturing sector.