As promised, we are following up on the release of several economic indicators. Australian Industries Group, the Bureau of Statistics and Census Australia released performance reports for manufacturing, trades and services, and well as new building approval data and home sales figures.

Below is a brief summary of the indicators:
(For more information about each indicator, view our previous post.)

Performance of Manufacturing Index (PMI)

The Australian Industry Group’s Index slipped 2.7 points, down to 48.5, putting it below the 50 point mark that separates expansion and contraction. According to the Group’s CEO, Heather Ridout, the decline confirms that the recovery of our economy remains patchy, most likely due to a weak global economy and rising interest rates.

Graeme Billings, PricewaterhouseCoopers Global Head of Industrial Manufacturing, had advice for Australian businesses, which will face competition from lower cost economies while our dollar remains strong:

“The key to successfully navigating these difficult conditions is a strong focus on cost and cash flow management," said Billings.

For more information visit www.aigroup.com.au

Home Sales Figures & Building Approval Data (Housing Industry Association)

The HIA figures show a slight 0.3% rise in home sales, with a 4.9% decline in the multi-unit sector grossly responsible for the modest result, according to the report figures. HIA’s chief economist Harley Dale predicts “tight rental market conditions over 2010.” However, he goes on to say that overall, “leading indicators are pointing to a recovery in new residential construction.”
Commsec’s chief economist Craig James echoes Dale’s positive outlook for Australia’s builders. Figures show that, “new approvals to build homes have risen by more than a third, while loans…to build new dwellings are at the highest levels in 15 years,” says James.

The reserve bank has already lifted rates 3 times, up to 3.75%, with a 50/50 chance of another hike in February. And, as more people feel assured with the recovery of the US, demand for new homes and renovation should advance.

For more information visit www.hia.com.au

Performance of Services Index

The Commonwealth Bank Index fell for the 9th consecutive month down to 39.5 points (far below the 50 point level indicating expansion.) with activity down in 8 of the 9 sub-sectors.
AIGroup’s CEO Heather Ridout commented that, “business-related, property and wholesale services are very weak, while consumer-related ones such as retail, were steady in December.” She continued to caution that although cafes and accommodation picked up during the holiday season, the index is not growing, “just contracting at a slower pace.”

Therefore, remain conservative, and have a good understanding of your cashflow needs.

International Trade & Retail Sales Figures

The Australian Bureau of Statistics announced a higher-than-expected 1.4% increase in sales across all retail industry groups. According to The Australian, previously surveyed economists were off by 1%, or with their average prediction of a slight 0.3% rise. The healthy sales fuelled the Australian dollar above US92 cents, leading up to the Reserve Bank’s first Board Meeting of 2010 next month. There is no definite indication that the bank will raise rates up to 4%, which would easily make it the highest rate in the developed world.

Visit Australian Bureau of Statistics at www.abs.gov.au


Overall, the results show a recovering, yet fragile economic climate at the start of 2010. However, particularly in the Australian economy, car sales continue to soar, and there is a rise in apartment approvals. This means that although major project approvals and large scale planning is held back by the weaker global economy, local markets are benefitting from consumer confidence. At Morris Finance Ltd., we are seeing this trend first hand with a continuing increase of new inquiries. Our advisors are always available to answer questions regarding finance for your business, working with your cashflow and industry conditions.