Consumer confidence drops 5.7% in January due to floods: Economy roundup

Consumer confidence dropped by 5.7% in January due to the impact of the Queensland floods, according to the latest Westpac-Melbourne Institute Index of Consumer Sentiment.

However, Westpac chief economist Bill Evans says the survey is a difficult one to interpret, given so much of the media was dominated by the floods in Queensland. And although the result is still about 4%above the long term average, sentiment is down 12.9% from a year ago.

“Because of the extreme events in Queensland, and the lower than usual representation from Brisbane, it interesting to assess the national index excluding Queensland…which fell by 3.2%.”

He says the floods are probably the main reason for the fall in confidence.

“News on the other factors which usually dominate confidence, such as interest rates, job prospects, and international economic conditions has been relatively stable since the previous survey”.

Evans said the short-term outlook is quite weak, but more will be known when the RBA meets on February 1. At that time, a statement on monetary policy will be released, with revised growth and inflation forecasts.

But as a result of the floods, Evans says any rate rise will likely be delayed into the second half of 2011.

“We confidently expect rates to remain steady following the Board meeting on February 1,” he said.

Rudd warns on GDP hit from floods

Foreign minister Kevin Rudd has said the country needs to brace itself for a hit to GDP due to the floods in Queensland.

“This is a big impact on the state’s economy and, therefore, a significant impact on the national economy,” Rudd told Sky News.

“You can’t close down a capital city for a week and for it not to have an effect on gross state product and gross domestic product.

“We need to brace ourselves for those numbers when they are finally sifted and done.”

Kathmandu upgrades profit guidance, shares rise 14%

Clothing retailer Kathmandu Holdings has said it expects to see higher profit in the six months to January due to stronger sales, sending the company’s shares up 14% to $1.57 this morning.

The company said in a statement that sales were up by as much as 10.3% in that period, with earnings before interest and tax likely to be between $NZ18.5 million and $NZ19.5 million – representing a 26% increase from 2009.

Chief executive officer Peter Halkett said the company was optimistic but also noted that “our overall profit result for the full year will remain dependent on second half year trading, when historically approximately 60% of Kathmandu’s full year sales are made”.

Alcoa signs agreement with China Power

Alcoa and China Power Investment Corp have signed a new agreement to collaborate on a number of energy projects, which represent a potential investment of $US7.5 billion.

 “This is an historic opportunity at a pivotal moment in US-China relations,” Alcoa chairman and chief executive Klaus Kleinfeld said in a statement.

“Two iconic brands will be working together around the world in a long-term relationship, sharing best practices and experiences in promising emerging economies.”

Shares open flat on weak Wall Street leads

The Australian share market has opened flat this morning, following from weak leads on both Wall Street and European markets.

The benchmark S&P/ASX200 index was up three points or 0.08% to 4805.5 at 12.15 AEST, while the Australian dollar maintained its position at US99c, although it did slip above parity overnight.

AMP shares dropped 1% to $5.10, as Commonwealth Bank shares rose 0.1% to $51.50. NAB lost 0.1% to $24.24 as Westpac gained 0.1% to $22.42.

Iluka Resources revenue up 63.4%

Iluka Resources has announced it increased full year sales revenue by 63.4% in 2010 due to higher sales volumes and average prices

“Iluka finished the year in the position of being unable to satisfy fully strong customer demand for zircon products,” the company said in a statement.

“The increase in year-on-year production volumes reflects a recovery in global demand for Iluka’s products, following appreciably lower demand in 2009 associated with global economic conditions.”

Theiss wins Peabody contract

Leighton Holdings subsidiary Theiss has won a new contract with Peabody Energy Australia to extend operations at the Burton Coal Mine in Bowen Basin.

“The high coal will be mined to a depth of up to 240 metres, making this operation the deepest open-cut operation in the Bowen Basin,” chief executive Bruce Munro said in a statement.

The extension will allow more than 500 people to become employed, with the requirement of an additional Liebherr R9800 backhoe excavators.

Wall Street shares rise on IBM figures

Wall Street stocks have managed to gain some ground overnight, with better-than-expected IBM results drawing attention away from Apple’s announcement chief executive Steve Jobs will take an indefinite leave of absence due to health reasons.

The Dow Jones industrial average rose 50.55 points, or 0.43%, to 11,837.93.