egolinews.com

The Australian Bureau of Statistics reported an unexpected 1.4% fall to $19.8 billion in retail sales in February following a 1.1% increase in January. The ABS also released the monthly building approvals figures, which revealed a 3.3% drop in the number of dwelling units approved in February.

The surprising declines have already fuelled speculation that the Reserve Bank will keep the official interest rate unchanged when it meets next Tuesday. 

Forecasts were for a 0.3% rise in retail sales for the month, with the drop largely attributed to the four official interest rate hikes since October.

The ABS said sales dropped, in seasonally adjusted terms, across five industry groups, with New South Wales recording the largest decline in sales with a 2.5% fall.

The only state and territory to see an increase in sales during February were Tasmania (1.5%) and the Northern Territory (0.8%).

The ABS said trend turnover for February 2010 rose 0.1%.

Looking at the building approvals figures, South Australia witnessed the largest fall with a 23.3% drop. In Australia’s most populous state, New South Wales, approvals slumped 14.6%.

Forecasts were for building approvals nationally to rise in excess of 2%.

After two-months of increases the number of approvals for private sector houses declined 0.9% during February, with New South Wales lagging once again, this tie with a 10.4% fall.

The ABS said the value of total building approved fell 4.5% in February, while the value of total residential building approvals rose 1.2% and non-residential building approvals fell 13.0%.

Meanwhile in separate data released today by the RBA, total credit provided to the private sector by financial intermediaries rose by 0.4% over February 2010, following an increase of 0.4% over January.

Over the year to February, total credit rose by 1.6%.

New Zealand reported today seasonally adjusted current account balance deficit of $3.1 billion for the December quarter, a swing from a $39 million surplus in the prior quarter – the first such surplus posted in more than 20 years. The swing from a surplus to a deficit was driven by an increase in income earned by foreign investors from their New Zealand investments, Statistics New Zealand said.

The result is worse than analysts’ consensus and is likely to put more pressure on the New Zealand central bank to keep interest rates at 2.5% – a figure that has remained steady for the last eight months, and something they have already indicated they would do until at least mid-2010.

The result also means that New Zealand investors are more likely to invest in Australia’s debt market where the Australian Reserve Bank looks likely to continue raising interest rates in the short term above the current level of 4%.

The New Zealand central bank is also faced with higher unemployment, currently sitting around 7.3%, easing inflationary pressures.

In the fourth quarter CPI actually fell 0.2%.

Other economic indicators in New Zealand also continue to underwhelm, with retail sales falling 0.4% from November to December.

And not including auto sales, retail sales fell by as much as 2%.

Retail sales is an important economic indicator the shaky isles with around 59% of GDP coming from domestic consumption.

Looking at the current account result, the June and September 2009 quarters, after tax profits of foreign owned New Zealand banks were reduced by unusually large company tax transactions.

”In the December 2009 quarter, some of this tax was reversed, contributing to a rise in profits earned by foreign owned banks.”

"Company profits are returning to levels seen before the effects of the tax charges and the financial crisis," government and international accounts manager John Morris said.

For the year, the current account deficit was NZ$5.5 billion, or 2.9% of GDP – worse than the widely expected 1.9% of GDP.

Meanwhile, The New Zealand Herald reported this morning that the NZ oil industry could reap NZ$30 billion annually by 2025, more than the country’s dairy industry.

The country earned just NZ$2.8 billion from oil in 2008.

One year on from the bear market lows of the global financial crisis, after a corner turned on 10 March 2009 when Citigroup CEO Vikram Pandit said the US bank was on track to post a profit in the March 2009 quarter, most companies locally have posted strong gains.

Of course, some recoveries have been stronger than others.

Telstra shareholders have continued to see their investment erode, while other sectors and stocks rallied. The telco hit an all-time low of $2.88 earlier this month.

Not even at the depths of the GFC did investors have so little faith in the company, with Telstra’s GFC closing low of $2.96 coming on 19 March 2009.

By 10 March 2010, Telstra shares closed at $2.99, a mere 1% gain in a year.

Telstra wasn’t alone in the telco sector, with Telecom NZ the only company in the ASX/100 to actually be lower on 10 March 2010 than at their GFC low.

In early March 2009, Telecom NZ shares were trading at $1.75, against $1.72 last week.

Among ASX/100 listed telco’s the average gain from GFC lows has been just 4%, with Singtel posting a 12% return.

It’s a different story for the Material and Resource stocks, which make up 18 members of the ASX/100 – or 19 if you include Eldorado Gold Corporation, which first listed last December.

The average gain there has been nearly 120%!

Australia’s third-largest iron ore producer, Fortescue, is the sector’s outstanding performer with its shares rising from GFC closing lows in mid-November 2008 of $1.29 to $4.82 last week, a rise of 274% (although its shares have been as high as $5.57 in the last year, a 332% hike).

That said, Fortescue is still only just under one-third of its way back to its pre-GFC high of $13.15 in June 2008.

Another notable gainer is Aquarius Platinum, whose shares have risen 216%. The South African based miner's shares hit a low $2.03 on 28 October 2008, but have since risen to $6.42 by 10 March 2010.

It wasn't all big gains in the sector. Agrichem company Nufarm’s shares have only returned 11% from GFC lows, a far cry from rival Incitec Pivot – its shares are up 101%.

Looking at the numbers for the Materials and Resources sector, the 120% average rise in share price is still only 38% of the way back to their average peak prices seen on 23 November 2007.

Meanwhile, if you invested in the Property Trusts sector you should have done even better with prices there, on average, rising 140% for ASX/100 listed companies.

Goodman Group shares have surged 340% to 61.5c, while the sector’s largest play, Westfield, has seen its shares rise 35% to $12.07

Interestingly there, prices have only recovered 20% of the way back to their June 2007 highs (on average).

Another point to note about Property Trusts is that their peak in June 2007 was earlier than for most sectors, while their emergence from lows in March 2009 proved Property Trusts to one of the slowest recoverers.

Elsewhere the Industrials sector average share price has risen, on average, 138% from GFC lows, led by rail and ports operator Asciano whose share have surged 423% from 35.5c per share to $1.86 last week.

Qantas shares have doubled to $2.84 from exactly a year previously.

Seek and Transfield shares were up 236% and 261% respectively.

Looking at the Banks and Financials sector, the average return for ASX/100 listed stocks was 102%.

Among the big banks, Macquarie led the way higher from closing lows of $15.75 (although intra-day lows touched $15.00) to just under $50 last Wednesday – a rise of 211%.

CBA rallied 131%, ANZ 101% and Westpac 87% from GFC lows a year ago, while NAB has risen 67%.

However, in a further breakdown of their recovery, CBA shares are now around 87% recovered to their 2007 highs, while NAB is just 37% of the way back from a low of $16.03 to their November 2007 all-time high of $44.84.

However, it’s the second-tier Challanger Financial Group which outperformed them all, surging just over 300% from their GFC low on 13 March 2009.

Among the underperformers, IAG shares have risen from $3.06 to $4.00 – or around 30%.

Consumer Staples shares were among the poorest sectors to invest, with the average gain there for ASX/100 listed companies coming in at just under 50%.

Wesfarmers easily outperformed, with its shares rising in value from $14.54 on 12 December 2008 to $32.23 last week – a rise of 121%.

The second highest gainer in the sector was Coca-Cola Amatil which saw its share price gain 62% to $11.17.

Wesfarmers rival, Woolworths, gained a modest 22% from July 2008 lows, with their price last week of $28.20 representing a 42% recovery to pre-GFC highs. Wesfarmers shares are around 63% of their way back.

Metcash, by comparison, has seen its shares rise just 10% from GFC lows, however are only 22% recovered back to their April 2007 peak of $5.40.

In other sectors, for the 14 Consumer Discretionary stocks on the ASX/100 the average return has been 87%.

The best performer has been JB Hi-Fi, whose shares are up 176%, followed by David Jones, which has risen 141% from 4 March 2009 lows of $2.09 to $5.07 last week.

It’s the gamers who have lagged noticeably for the sector, with Tabcorp and Tatts both returning around 11%, while Aristocrat returned 37%.

As would be expected with persistent unemployment in the US and interest rates rising here, Consumer Discretionary stocks have been some of the slowest to recover, with the average share price only 32% of the way back to their peaks pre-GFC.

The sector, on average, hit its peak on 25 March 2007, only emerging from lows in late February 2009.

Elsewhere, the Energy sector has returned an average of 98% from mid-November 2008 lows to last week across the sector’s 11 stocks.

The best performer has been Arrow Energy, however that company’s shares have been influenced by the recent US$3.3 billion takeover offer from PetroChina and Royal Dutch Shell.

WorleyParsons and Centennial Coal have returned 133% and 146%.

If you had invested in Santos your returns would have been the lowest in the ASX/100 Energy sector, with that company’s share price rising just 44% to $13.90 last week from lows of $9.63 on 17 October 2008. Uranium specialist ERA has posted 85% gains, however is still only 47% of the way back to pre-GFC highs.

Interestingly the Energy sector hit its pre-GFC highs later (April 2008) than other sectors and GFC lows earlier than most other sectors (October 2008).

Of course, the ASX/100 isn’t always the best place to look for the best returns.

Pacific Brands hit closing lows of 13c on 5 March 2009, before hitting highs of $1.52 on 19 October 2009 – a 1,070% return.

Otherwise Bradken may have been your preference – its shares have spiked from 97c on 9 March 2009 to $7.30 today, for a lazy 652% gain.

Extract Resources Limited (EXT) said that its Rossing South project in Namibia still has the potential to be one of the world’s largest uranium mines as the feasibility study into the mine continues. The uranium miner said it hoped to announce an updated Rössing South resource in the third quarter of this year.

”The updated estimate is expected to increase the overall size and confidence levels of the Rössing South resource,” the company said in a statement.

Studies to fully define the costs associated with procurement of water, power and acid delivery, together with external infrastructure including rail and road, are ongoing.

At 1135 AEDT, Extract Resources shares were down 11c to $7.00.

The Reserve Bank of Australia ("RBA”) has decided to raise the official cash rate by 25 basis points, or 0.25%, to 4%.

In commenting on the decision, RBA Governor Glenn Stevens said the global economy was growing and GDP growth would match trend pace in 2010 and 2011.

This was especially in Australia’s region, with some Asian countries even seeking to unwind stimulus packages.

Mr Stevens acknowledged that credit conditions remained difficult with banks in some countries still unwilling to loan.

Turning his focus to Australia, Mr Stevens said economic conditions last year were stronger than expected, as evidenced by unemployment peaking considerably lower than expected.

Other economic indicators including housing approvals had also been growing strongly, while business confidence surveys also pointed to improved conditions.

Commenting on inflation, Mr Stevens said CPI inflation had risen somewhat recently as temporary factors that had been holding it to unusually low rates are now abating.

”Inflation is expected to be consistent with the target in 2010,” Mr Stevens said.

He went on to say that, despite banks generally passing on more than the official rate, interest rates to most borrowers nonetheless remained lower than average.

”The Board judges that with growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average,” Mr Stevens said.

In a decision that would have surprised many, the Reserve Bank of Australia decided to leave the cash rate unchanged at 3.75% after three consecutive monthly rises. While acknowledging the strong outlook for the Australian economy, the RBA decided to wait a little longer to judge the impact of recent rate rises before raising rates again.

RBA Governor, Glenn Stevens, said expansion is likely to be modest in the major countries, due to the continuing legacy of the financial crisis, resulting in ongoing excess capacity.

“In Asia, where financial sectors are not impaired, recovery has been much quicker to date, though the Chinese authorities are now seeking to reduce the degree of stimulus to their economy,” Mr Stevens said.

”Global financial markets are functioning much better than they were a year ago.  Credit conditions nonetheless remain difficult in the major countries as banks continue to face loan losses associated with the period of economic weakness.”

At home, Mr Stevens pointed to the fact that stimulus measures have faded, while also noting the support strong labour market outcomes and a recovery in net worth has had on household finances.

”Public infrastructure spending is now boosting demand, as is an upturn in housing construction,” Mr Stevens said.  

”Investment in the resources sector is strong.  The rate of unemployment appears to have peaked at a much lower level than earlier expected.”

Mr Stevens added that inflation had declined, as expected, and credit for housing has been expanding at a solid pace. However, business credit has continued to fall.

“Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point,” he said.

”Since information about the early impact of those changes is still limited, the Board judged it appropriate to hold a steady setting of monetary policy for the time being.”

The board said it expects the monetary policy to be adjusted further, over time, in order to ensure that inflation remains consistent with the target over the medium term.

According to the Australian Bureau of Statistics ("ABS") Australia’s trade deficit increased from $1.85 billion in September to a revised $2.38 billion in October. The rise was largely attributed to a drop in resource exports.

The ABS reported a 3.5% fall in exports to $19.5 billion, which included a 12% drop in coal shipments and a 7% slide in the metal ores and minerals component.

Imports weakened 0.8% to $21.8 billion, with the largest fall seen in the fuel shipments, which was down 10%.

The ABS said the trend estimate of the balance on goods and services was a deficit of $1.94 billion in October 2009, an increase of $122 million on a revised deficit in September 2009.

According to the Australian Bureau of Statistics retail trade rose a seasonally adjusted 0.3% in October to $19.75 billion. The increase was in line with forecasts after a 0.2% decrease in September.

The seasonally adjusted estimate increased 0.5% in August.

Meanwhile, in original terms Australian turnover increased 6.6% in October 2009 and 6% compared with October 2008.

Department Stores led the sales growth statistics, increasing 1.9%, while sales in Cafes, Restaurants & Takeaway Food Services and Household Goods Retailing rose 1.1% and 0.1%.

Sales in Clothing, Footwear & Other Personal Accessory Retailing and Food Retailing weakened 0.2% and 0.1%.

Looking at the states, the Northern territory witnessed the largest increase in sales, up 1.8%, while Tasmania wasn’t too far behind with a 1.5% rise. The largest fall was seen in Victoria, with sales down 0.9%.

The Reserve Bank of Australia raised the cash rate by 25 basis points to 3.75% today, the third consecutive monthly rise. In explaining the decision Reserve Bank Governor Glenn Stevens said that the global economy was growing again and although modest in the US and Europe, in Asia the recovery had been strong, with capital flows into Asia and other emerging regions gaining strength.

The central bank also pointed to the fact that Australia dodged the recession, with only a relatively mild downturn in the economy, with unemployment set to peak at considerably lower levels than forecast in the first half of the calendar year.

Mr Stevens also referred to the inflation level which remains subdued, with the bank referring to ‘temporary factors’.

”Both CPI and underlying inflation are expected to be consistent with the target in 2010,” Mr Stevens said.

Credit for housing had grown strongly, though the bank noted the decline in business credit as companies deleverage their balance sheets.

”With the risk of serious economic contraction in Australia having passed, the Board has moved at recent meetings to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker,” Mr Stevens concluded.

The latest Westpac-Melbourne Institute survey revealed the economy was rebounding faster than any time since the 1970’s after the release of the leading index of economic indicators showed growth of 5.8% in September, up from 3.8% in August and above the longer-term trend of 3.1%.

The index measures the pace of economic activity three to nine months into the future.

Westpac's chief economist, Bill Evans, said the pace of economic recovery was ‘extraordinary’.

”Growth has accelerated from –5.4% in May to 5.8% in September,” Mr Evans said.

”That is the fastest turnaround in the growth rate of the Leading Index since the economy bounced out of recession in the mid 1970's.”

The sharp uptick in the pace of economic recovery has prompted the bank to revise its growth forecast for Australia, with forecasts for growth now at 4% for 2010, up from 1.75% this year.

The growth in the leading economic activity index was prompted by improvements in three of the four key measures, including US industrial production, dwelling approvals and the share market.

”These gains were partly offset by a contracting effect from the real money supply – partly reflecting credit conditions,” the Melbourne Institute said.

Westpac said the strong result was likely to put pressure on interest rates, with another hike expected before Christmas.