Services sector continues to improve, Shares slip: Economy Roundup

The rate of contraction in the services sector slowed during August, according to the latest results from the Australian Industry Group-Commonwealth Bank performance of services index.

The index rose 3.9 points during August to 48, gaining ground towards the 50 point level that separates expansion from contraction.

AIG chief executive Heather Ridout said in a statement the services sector is continuing to improve as companies take on a more positive view of the economy.

“Companies surveyed cited benefits from improvements in consumer and business confidence, business investment, and housing sector conditions, illustrating the continuing role of monetary and fiscal stimulus in supporting the economy,” she said.

“The answer to the question as to whether the rebound in activity is self-sustaining is uncertain and therefore authorities should proceed with great caution.”

Meanwhile, the Australian trade deficit has increased to $1.56 billion during July, according to new figures from the Australian Bureau of Statistics, a seasonally adjusted increase of $1.02 billion.

Goods and services credits dropped 1% to $20.04 billion, with other goods falling 22%. The non-monetary gold component fell 27%, or $309 million.

Rural goods dropped by 4%, with services credits also falling 1%. However, non-rural goods rose by 1%.

Sharemarket falls after Wall Street losses

The Australian sharemarket has opened lower today after a disappointing night on Wall Street, where stocks dropped due to poor performance in equity markets.

The benchmark S&P/ASX200 index was down 6.7 points or 0.15% to 4431.5 at 12.00 AEST. However, the Australian dollar gained ground to US84c after GDP data released yesterday showed the economy grew 0.6% in the June quarter.

Commonwealth Bank shares fell 1% to $45.05, while NAB shares dropped 0.8% to $28.07. ANZ gained 0.3% to $21.24 as AMP shares lost 1.6% to $6.34.

Telstra chief executive David Thodey has told the Wall Street Journal that the company is “open to any option” in assisting the Government in regards to its $43 billion National Broadband Network.

“We are actively working with the Government to see how we can participate,” Thodey said. The comments come after NBN Co. board member Doug Campbell said it is in negotiations with Telstra at the “highest level”.

Virgin Blue raises $98.3 million

Meanwhile, discount airline Virgin Blue has raised $98.3 million following the completion of the retail component of its non-renounceable entitlement offer.

Chief executive officer Brett Godfrey said in a statement that the airline received support from its shareholders.

“As a result of the entitlement offer, Virgin Blue is better positioned to withstand the current difficult operating environment and to take advantage of growth opportunities in the sector as they arise,” he said.

Overseas, Wall Street recorded negative results as investors were nervous after a new report revealed more jobs were lost in August, with an official report from the Department of Labour expected on Friday.

The Dow Jones Industrial Average fell 29.93 points or 0.32% to 9280.67, with the S&P 500 index falling 3.29 points or 0.33% to 944.75 points.

Also in the US, the Federal Reserve released the minutes of its last policy meeting last month, announcing that any risks threatening the country’s economy have eased “considerably”.

“Meeting participants agreed that the incoming data and anecdotal evidence had strengthened their confidence that the downturn in economic activity was ending and that growth was likely to resume in the second half of the year,” the board said.