5 points: 1) Australian rates will not be cut. 2) The $A is now heading back down to test the 62c level. 3) The current $A movement is due to a strengthening in the $US which is also improving on the cross rates, and against a number of European currencies (ie: beyond the Euro - SEK, for instance). 4) What is business other than a collective grouping of interests, the primary objective of which is to ensure that R>X. For all eternity, businesses have been continually managing (sometimes, mis-managing) their costs, and rationalising (ie: optimising) their operations. I would rather have a business which is exercising prudent cost control and business rationalisation processes, than a business which is throwing caution to the wind. 5) Regarding improving demand, or any other economic indicator out there, I gather that you are not a particularly avid reader of the economic pages (either here in Australia, or overseas in the States). Otherwise, you would have noticed the following: a) US GDP increased 2.4% during Q2, at a time when most commentators were expecting a flat-line, or a double dip (announced, 31/7); b) US factory orders increased 1.7% in June (the highest increase in 3 months - even MSNBC reported on this on their website - see below) (announced 4/8); c) US construction spending rose 0.3% in June (erroneously reported earlier as having flatlined) (announced 4/8); d) unemployment claims fell last week to their lowest level in the last 2 months (announced 31/7), etc.
And, so far tonight: 1) the UK is reporting a continuing pick-up in the recovery of its Services sector, with the services PMI rising from 54.5 to 56.6 in July which was stronger than originally expected; 2) an improving UK Manufacturing outlook with output rising 0.2% in June (over May) and 3.5% in June (over June 2002); and 3) improving UK industrial production conditions with production up 0.7% in June and up 2.2% for the year.
And then, Lehman Brothers is also reporting tonight improving sentiment in the Euro-zone, with: 1) Euro area service sector PMI rising above the 50-“boom-bust” mark in July, for the first time in five months. The headline reading for business activity rose to 50.2 from June’s 48.2 (index, sa), above expectations (Lehman: 48.7, median: 48.6). 2) The new businesses index inching up for the second consecutive month to 49.9 (from June’s 46.5), while business expectations continued to rise to 65.5 from the previous month’s 63.6. 3) Taken together with the manufacturing report, today’s data results in an output-based composite reading of 49.8 (index, sa), up from 48.2 in June.
Orders to U.S. factories rose 1.7 percent in June, the biggest gain in three months, a fresh sign that the nation's battered manufacturing sector is turning a corner.
THE SOLID INCREASE reported by the Commerce Department Monday came after orders went up by a modest 0.3 percent in May. The performance in June was stronger than economists were expecting; they were forecasting a 1.5 percent rise in factory orders. Gains were fairly widespread with orders going up for machinery, household appliances and cars as well as "nondurable" goods such as food products and chemicals.
Manufacturing has had the hardest time trying to get back on firmer footing after being knocked down by the 2001 recession. Faced with lackluster demand at home and abroad as well as competition from a flood of imports, factories have throttled back production and cut jobs.
Monday's report along with other recent data on factory activity suggest that the industry is on the mend.
A report released Friday showed that manufacturing expanded in July for the first time in five months. The Institute for Supply Management's manufacturing index rose to 51.8 in July, up from 49.8 in June. A reading below 50 indicates that manufacturing activity is slowing, and a reading above 50 indicates it is growing.
On Wall Street, stocks moved lower. The Dow Jones industrials lost 72 points and the Nasdaq was off 23 points in morning trading.
Even with indications that manufacturing is picking up, employment in that sector isn't expected to show improvement any time soon, economists say. The sector lost 71,000 positions in July, marking the 36th month in a row of job losses.
In manufacturing, productivity has been solid, meaning factories can produce more with fewer people, a factor in the sector's job losses. Economists say employers will be wary about hiring back some workers until they are certain the economic recovery has staying power.
With scattered signs that the economy is getting better, the Federal Reserve probably will hold a key short-term interest rate at a 45-year low of 1 percent at its next meeting on Aug. 12, analysts said.
Near rock-bottom short-term interest rates combined with fatter paychecks and other tax incentives coming from President Bush's third round of tax cuts may spur consumers and businesses to spend and invest more, helping to lift the economy in the second half of this year.
Fed Chairman Alan Greenspan and private economists are hopeful that the economy will stage a sound rebound in the current third quarter and the final quarter of this year. Some project the second half growth rate to range from 3 percent to just over 4 percent.
Monday's report showed that orders for primary metals, including steel, went up 2.4 percent in June, after being flat in May. Orders for machinery rose 4 percent in June, compared with a 0.5 percent decline the month before.
For household appliances, orders increased 4.5 percent, an improvement from May's 17.5 percent drop.
Orders for all transportation products rose 4.7 percent in June, after a 2 percent decline in May. Excluding transportation orders, factories saw demand for all other products rise by 1.2 percent in June, the biggest increase since March. Orders for automobiles and parts rose 3 percent in June, the biggest gain since January 2002. In May, such orders fell by 1.9 percent.
For nondurables, orders increased 0.7 percent in June, on top of a 0.6 percent increase in May.
