New home sales rise 4.3% in March: Midday Roundup

The number of new home sales increased by 4.3% in March, according to the latest figures in the Housing Industry Association New Home Sales index.

The result comes as detached house sales increased by 5.8%, while sales of multi-units fell by 10%.

However, HIA chief economist Harley Dale says the industry still has a “long way to go” for sales to reach a healthy level.

“The March result for new home sales reflects an on-going pause in the interest rate hiking cycle and some abatement of the severe weather conditions witnessed in early 2011”.

Westpac records $3.17 billion profit

Westpac has recorded total cash earnings of $3.17 billion for the six months ending March 31, ahead of analysts’ expectations of a $3.02 billion result, despite what the company says is an environment of ongoing caution among businesses and consumers.

The result represents an 8% increase from the second half of 2010, while net profit after tax rose by 14% to $3.9 billion.

Cash earnings per share rose by 8% to 106 cents.

The bank said this morning its outlook for the rest of the year is positive, as business credit growth is likely to grow stronger.

“The large corporates are still repaying debt but we are seeing smaller businesses taking up debt,” chief financial officer Phil Coffey said this morning.

In a statement, Westpac said that despite “ongoing consumer and business caution… the operating environment has remained broadly supportive”.

“Although caution is expected to remain, given a low Australian unemployment rate of 4.9% and strong capital expenditure intentions, we expect sentiment to gradually improve over the remainder of 2011.”

As a result, Westpac says, business credit growth will recover. However, it warned that funding costs are still rising, and are likely to do so throughout 2011 and 2012.

Low unemployment and income growth will “generate activity for us and support our credit position”, Coffey says.

Westpac shares were down 1.9% to $24.26 at 12.00 AEST.

Services sector expands in April

Activity in the services sector has expanded during April after five consecutive months of declines, according to the latest Australian Industry Group – Commonwealth Bank Performance of Services index.

The index rose by five points to 51 points, above the 50-point level separating expansion from contraction.

“At this stage in the cycle, it is critical that business and consumer confidence can gather momentum without setbacks in the form of additional interest rate rises or budget measures that detract from private sector activity,” AIG chief executive Heather Ridout said in a statement.

“The high Australian dollar and lack of support from productivity growth will be a continuing drag on the economy.”

Commonwealth Bank senior economist John Peters added that while the five point jump is positive, businesses are still suffering due to the higher dollar allowing more people to shop offshore.

Australian sharemarket opens lower

The Australian sharemarket has opened lower this morning, following a weak night on Wall Street where stocks fell due to poor performances in commodity prices.

The benchmark S&P/ASX200 index was down 36 points or 0.75% to 4748.5 at 12.00 AEST, while the Australian dollar opened lower to $US1.08.

AMP shares lost 0.74% to $5.35, as Commonwealth Bank shares fell 1.07% to $52.79. NAB lost 1.63% to $26.61 as ANZ fell 0.84% to $23.60.

Overseas, the Dow Jones Industrial Average only gained 0.15 points to 12,807.51.

Commercial property survey reveals stronger conditions

The commercial property industry is continuing to gain strength, according to the latest NAB Quarterly Commercial Property Survey.

The survey’s index turned positive in March, “underpinned by the office and CBD hotel markets”, it claims.

The index rose to six points, up from negative one point in December. The office and hotel markets each increased by 27 and 47 points respectively.

However, conditions in the industrial and retail sectors turned negative, and there isn’t good news for some of the other sectors.

“Retail is now expected to be the weakest performer in the commercial space over the next one to two years. Victoria remains the strongest market overall and Queensland the weakest.”

“However, Victoria’s reign is set to end with Western Australia rebounding strongly over the next six months. Soft conditions continue to impact negatively on new development plans, with finance/funding and interest rates the main challenges confronting property firms over the next year.”

But the survey notes that the concern about these issues “is slowly diminishing”.

The survey reveals capital value expectations improved in the office and industrial sectors, which office values up by 0.4%.

Coca-Cola profit hit by rising costs

Coca-Cola Amatil has released a trading update, warning that increasing costs caused by the floods in Queensland and Victoria will impact on profitability.

“As well, the generally softer consumer spending environment experienced in 2010 has continued into 2011 as consumers deal with higher food, fuel and utility costs as well as the impact of higher interest rates.”

The company said the strength of the Australian dollar has also impacted on the profitability of packaged fruit and vegetable products.

The company is now expecting EBIT growth of 5% in the first half.