US rate cut, manufacturing improves, building approvals fall: Economy roundup

SmartCompany /

The US economy might not officially be in recession – data released overnight shows it actually grew at 0.6% during the first the three months of 2008 – but there’s no doubt that the world’s biggest economy is in big trouble. Even the central bankers realise the problem – as expected the US Federal Reserve cut rates by 25 basis points to 2% in an effort to kick-start the economy.

There was little immediate reaction to the cut, other than a 1 cent rise in the Australian dollar to a touch over 94 cents. The Dow Jones finished flat last night and the local market has fallen by 0.8% in morning trade, mainly on the back of weaker commodity prices. The big corporate news came from Westpac, which posted a 10% increase in first-half cash profit to $1.8 billion.

The Australian Industry Group’s Performance of Manufacturing Index increased slightly in April, up 0.4 points to 52.7, just above the 50-point mark separating growth from contraction in the sector. Higher interest rates and easing global conditions continue to weight on manufacturers.

Building approvals fell 5.7% in March, a much weaker result than expected outcome of a 1% fall. The fall in approvals was driven by a large 5.8% decline in approvals for houses. Sally Auld, co-head of Australian economics and interest rate research at ANZ, says: “This is a genuinely soft piece of data which will add to the case for unchanged policy at next week’s RBA board meeting.”


SmartCompany is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.

We Recommend