Saturday July 04, 2009
SYDNEY: Australian vehicles sales surged in June to their third highest volume ever while activity in the service sector boasted the first expansion in 15 months, evidence that policy stimulus was fuelling consumer demand. The upbeat industry reports only added to expectations the Reserve Bank of Australia (RBA) would keep rates steady at a record low of 3.0 percent at its July policy meeting next week.
"The data is consistent with a broadening recovery and, if anything, suggests the momentum is actually accelerating," said Brian Redican, a senior economist at Macquarie. "It shows rates are low enough to fuel demand and takes pressure off the RBA to do much more," he added. The central bank has cut interest rates by 425 basis points since September in an effort to cushion the economy from the worst of the global fallout.
The Labour government has done its part with over A$52 billion ($41 billion) of hand-outs and infrastructure pledges. Included in the stimulus was an extended tax break for small businesses to buy new vehicles, and that looked to have had the desired effect.
Figures from the Australian Federal Chamber of Automotive Industries showed new vehicle sales jumped 11.8 percent in seasonally adjusted terms in June, from May. Vehicle demand is typically strong in June as dealers cut prices to clear stock for the end of the financial year.
Unadjusted sales rose 36.3 percent to 102,847. That was down 3.5 percent on last June's record, but still the third-highest monthly volume ever. It was also a big turnaround from the lows suffered in April, when sales were down 24 percent on the year.
"That's an amazing result," said Macquarie's Redican. "A lot of these sales could also count toward business investment, which has been one of the weakest sectors." The data provided some underlying support for the Australian dollar. High-yield currencies fell following weak US jobs data, but the Australian dollar later inched up even though it remained well below 80 US cents. The strength of car sales fuelled hopes that a pickup in retail demand seen in May extended through to June as well. Government data out earlier this week showed retail sales rose a healthy 1 percent in May, twice the market forecast.
Adding to the optimism was a survey of around 200 companies in the service sector which found a broad-based improvement in everything from financial to property, retail and health.
The Australian Industry Group (AiG)-Commonwealth Bank Performance of Services Index (PSI) leaped 10.3 points in June to 50.2, taking it above the 50 level that marks the threshold between growth and contraction. "Improving conditions in the services sector are consistent with other recent news which suggests that the economy may well side-step a severe recession in 2009, despite the negative headwinds from the global economic meltdown," said John Peters, a senior economist at CBA. The survey's index of sales climbed 16.1 points to 55.2, the highest reading since the start of 2008, while its measure of new orders climbed 16.6 points to 51.5, holding out hope the recovery would prove sustainable.
There was also better news on jobs, with the index of employment rising 2.5 points to 48.5, the highest reading in a year. The service sector is easily the biggest employer in Australia and the improvement might bode well for the official labour report for June that is due next week. Actual job losses have been remarkably subdued so far this year but the unemployment rate has still risen to a five-year high of 5.7 percent, making it a major threat to consumer demand.
(Reuters)
SYDNEY: Australian vehicles sales surged in June to their third highest volume ever while activity in the service sector boasted the first expansion in 15 months, evidence that policy stimulus was fuelling consumer demand. The upbeat industry reports only added to expectations the Reserve Bank of Australia (RBA) would keep rates steady at a record low of 3.0 percent at its July policy meeting next week.
"The data is consistent with a broadening recovery and, if anything, suggests the momentum is actually accelerating," said Brian Redican, a senior economist at Macquarie. "It shows rates are low enough to fuel demand and takes pressure off the RBA to do much more," he added. The central bank has cut interest rates by 425 basis points since September in an effort to cushion the economy from the worst of the global fallout.
The Labour government has done its part with over A$52 billion ($41 billion) of hand-outs and infrastructure pledges. Included in the stimulus was an extended tax break for small businesses to buy new vehicles, and that looked to have had the desired effect.
Figures from the Australian Federal Chamber of Automotive Industries showed new vehicle sales jumped 11.8 percent in seasonally adjusted terms in June, from May. Vehicle demand is typically strong in June as dealers cut prices to clear stock for the end of the financial year.
Unadjusted sales rose 36.3 percent to 102,847. That was down 3.5 percent on last June's record, but still the third-highest monthly volume ever. It was also a big turnaround from the lows suffered in April, when sales were down 24 percent on the year.
"That's an amazing result," said Macquarie's Redican. "A lot of these sales could also count toward business investment, which has been one of the weakest sectors." The data provided some underlying support for the Australian dollar. High-yield currencies fell following weak US jobs data, but the Australian dollar later inched up even though it remained well below 80 US cents. The strength of car sales fuelled hopes that a pickup in retail demand seen in May extended through to June as well. Government data out earlier this week showed retail sales rose a healthy 1 percent in May, twice the market forecast.
Adding to the optimism was a survey of around 200 companies in the service sector which found a broad-based improvement in everything from financial to property, retail and health.
The Australian Industry Group (AiG)-Commonwealth Bank Performance of Services Index (PSI) leaped 10.3 points in June to 50.2, taking it above the 50 level that marks the threshold between growth and contraction. "Improving conditions in the services sector are consistent with other recent news which suggests that the economy may well side-step a severe recession in 2009, despite the negative headwinds from the global economic meltdown," said John Peters, a senior economist at CBA. The survey's index of sales climbed 16.1 points to 55.2, the highest reading since the start of 2008, while its measure of new orders climbed 16.6 points to 51.5, holding out hope the recovery would prove sustainable.
There was also better news on jobs, with the index of employment rising 2.5 points to 48.5, the highest reading in a year. The service sector is easily the biggest employer in Australia and the improvement might bode well for the official labour report for June that is due next week. Actual job losses have been remarkably subdued so far this year but the unemployment rate has still risen to a five-year high of 5.7 percent, making it a major threat to consumer demand.
(Reuters)
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