Retail sales drop 1.4%, House price index jumps 4.2%: Economy roundup

New data from the Australian Bureau shows retail sales dropped by a seasonally adjusted 1.4% during June, following consecutive 1% increases during May and April.

But while retail sales dropped in the month of May, turnover (in original terms) increased by 7.9% in June 2009 compared to June 2008. Chains and other large retailers recorded an increase of 9.2%, while the “smaller” retailers estimate increased by 5.7%.

JPMorgan chief economist Stephen Walters told Reuters the decrease in June may have been due in part to discounts offered by retailers.

“It was a surprise retail was down so much on the month but when you look into it, department stores fell sharply, as did clothing sales, and they’re areas where there’s been pretty heavy discounting,” Walters said. “The message is that GDP numbers for the quarter will be strong, there’s no way we’re getting a negative GDP print.”

Separate ABS data released today also shows that preliminary estimates for the price index for the weighted average of the eight major capital cities increased by a higher-than-expected 4.2% during the June quarter.

The data shows all capital cities recorded quarterly increases, with Melbourne leading the charge at a 5.2% increase, followed by Sydney at 4.9%. Adelaide prices rose by 3.4%, Brisbane by 2.5% and Perth by 2.7%, while Canberra rose by 3.6%, Hobart by 2.5% and Darwin by 2.4%.

But prices have still decreased on an annual basis, the new figures show. The preliminary estimates show the price index for established houses for the weighted average of the eight major capital cities fell by 1.4%.

Housing prices fell in Perth by 3.7%, Brisbane by 3.3% and Melbourne by 1.5%. Sydney prices dropped by 0.9%, while Canberra prices only dropped by a marginal 0.2%.

Price increases on an annual basis were recorded in Darwin at 11%, Adelaide at 2.7% and Hobart at 0.1%.

“On house prices, the message is that policy works, if you cut interest rates to generational lows, pay people to buy houses, and see prices come off then you’ll get a big bounce,” Walters said.

Share market reaches nine-month high

Meanwhile, the Australian share market has opened to a nine-month high after good results from Wall Street, where good manufacturing and housing data brought optimism to the market.

The benchmark S&P/ASX200 index was up 68.6 points or 1.6% to 4332 at 12.20 AEST.

The Australian dollar also reached a new 10-month high today, moving up to US84c.

ANZ shares have gained 1.9% to $19.36, with Commonwealth Bank shares also gaining 1.4% to $44.28. NAB shares rose 2% to $25.44, while Westpac has gained 1.2% to $22.36.
ANZ Banking Group has made a deal with the Royal Bank of Scotland to buy some of its Asian businesses for about $687 million, as part of a push into Southeast Asia.

ANZ will buy the retail, wealth management and commercial businesses in Taiwan, Singapore, Indonesia and Hong Kong, as well as the RBS’s institutional banking businesses in Taiwan, the Philippines and Vietnam.

“The acquisition of these RBS businesses is a further stepping stone in our super regional strategy and creates a new platform for our retail and wealth businesses in Asia,” ANZ chief executive Mike Smith said in a statement.

“The businesses are an attractive portfolio of well-provisioned banking assets at a reasonable price. They complement ANZ’s existing businesses across greater China, Indochina and South East Asia and provide our franchise with further growth momentum.”

Wall Street lifts on manufacturing data

Meanwhile in the US, the S&P 500 index has risen above the 1000-point level for the first time in nine months due to higher than expected manufacturing data. The Institute for Supply Management said the index of national factory activity rose to 48.9 in July, the highest point since August 2008.

The Dow Jones industrial average rose 114.95 points, or 1.25%, to 9286.56. The S&P 500 Index climbed 15.15 points, or 1.53%, to 1002.63.

Back home, Bendigo and Adelaide Bank has lowered cash earnings guidance for the 2009 financial year after taking into account dealings with failed agribusiness Great Southern.

“A total of $20.2 million has been raised at June 30, 2009 in specific and collective provisions relating to loans which form the Great Southern portfolio,” the bank said in a statement to the ASX.

“BEN’s exposure to borrowers in Great Southern Managed Investment Schemes is approximately $550 million, spread across 8,200 growers. These loans are full-recourse to each individual borrower, with an average exposure of less than $70,000 and are spread across every state and territory of Australia,” the bank said.