More signs of rate pressure: Economy roundup
Thursday, 21 February 2008
Mike Preston, economics editor
The case for further interest rate rises of both the official and unofficial variety has been bolstered by new evidence of Australia’s economic strength and the banks’ vulnerability to the credit squeeze.
Australians bought over 92,000 new cars in January, a 0.6% increase on December that continues the 15-month long run of increasing car sales.
The popularity of sports utility vehicles continues to drive new car purchasing, with 2.9% more of the sporty 4WD style cars bought in January. Australian car makers will not be pleased with a 0.5% drop in passenger vehicle sales, however.
And Australian Bureau of Statistics data released today shows full-time weekly wages increased by 4.8% in the year to November 2007, with wages up by 0.6% in November 2007 alone.
But while the Australian economy leaps from strength to strength, the international credit squeeze is putting bank margins under pressure – and that could mean higher rates for consumers.
The three month bank bill swap rate, an important factor in banks’ decision making on credit prices, yesterday hit a 13-year high of 7.81%, The Australian Financial Review reports.
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But recent good news across a range of commodities is what has captured the attention of Australian markets today, pushing the S&P/ASX200 up 1% on yesterday’s close to 5552.1 at 12.30pm, representing a partial recovery from yesterday’s late falls.
A strong profit result from global IT company Hewlett Packard also drove US markets higher overnight, despite a clutch of worrying economic data showing the pace of inflation increasing but economic growth and employment declining.
The Dow Jones Index closed up 0.73% overnight to 12,427.26.