Company operating profits fell 0.8% in the June quarter, taking the annual rate from a revised 0.6% in the March quarter, back into negative territory at -0.4%.
The weakness in profits was concentrated in non-mining sectors, with company profits excluding mining down 1.6%. Mining profits grew 1.1% as a weaker Australian dollar more than offset lower commodity prices.
Inventories rose 0.2% in the June quarter and are expected to contribute 0.3 percentage points to growth in the March quarter.
Building approvals were stronger than expected, jumping 10.8% in July. The annual growth rate surged to 28.3% in the year to July, up from a decline of 11.8% in the year to June.
The strength was primarily in private sector 'other' dwellings (24.4%), which includes apartments and is volatile. In a promising signs, however, approvals in private sector houses were also strong rising 3.9% in July. Yesterday's building approvals data suggest lower interest rates are having a positive impact on dwelling investment.
RP Data-Rismark capital city dwelling prices rose 0.5% in August, to be up 5.3% for the year to August. From the trough in dwelling prices in May last year, dwelling prices are now up 7.0%. In August, Hobart (-1.9%) and Perth (-0.2%) were the only capital cities to experience declining dwelling prices.
The strongest performer for the month was Brisbane (1.5%). In annual terms, the strongest dwelling price gains were in Perth (9.4%), Sydney (7.0%) and Melbourne (4.3%).
AiG performance of manufacturing index rose to 46.4 in August. This was an improvement from the July reading of 42.0, but the index remains well below 50 indicating manufacturing activity contracted in August. The employment reading lifted to 46.3, but still remains in negative territory.
TD-MI inflation rose 0.1% in August, after rising 0.5% in July. The annual rate of inflation slowed to 2.1% in August, from 2.7% in July, supporting the case that inflation is not an impediment to further interest rate cuts, if they are deemed necessary.
US markets were closed for Labor Day holiday, however, sentiment elsewhere was boosted by positive manufacturing data in Europe and China and as the risk of a military strike on Syria lessened. Futures on the S&P500 lifted, while the Euro Stoxx rose 1.9%.
German bunds fell (yields rose) on the positive factory PMI data, which raised hopes that the global economy was improving.
Yesterday, Australian government bond yields rose, with both 3-year and 10-year bonds lifting 6 basis points to 2.75% and 3.96% respectively.
The US dollar strengthened against most currencies, and rose to a near one-month high against the yen as risk aversion eased.
The euro was volatile - it lifted only temporarily on the positive PMI data, but then fell later on.
The more positive risk environment and improving China prospects saw the Australian dollar touch above 90US cents against the US dollar and rise against the other majors.
The key event risk today is the RBA's cash rate decision. Although the RBA is expected to keep rates on hold, its accompanying statement will be closely watched.
Commodity prices were mixed on recent developments. The improved risk appetite and easing concerns over Syria were negative for gold. Oil prices initially fell on delayed action on Syria, but rebounded on the positive global data. Copper prices were also supported by an improved outlook for China.
The HSBC manufacturing PMI was left unchanged from its preliminary reading of 50.1 in August, but was below consensus expectations for a reading of 50.2. This is still well above the July reading of 47.7.
The eurozone factory PMI was revised up slightly in August to 51.4. This was despite a downward revision to the PMI factory for Germany, from 52.0 to 51.8.
The upward revision was largely due to improvements in Italy and Spain, which rose from 50.4 to 51.3 and 49.8 to 51.1 respectively. The French PMI was unrevised at 49.7.
Capital spending was unchanged in the year to the second quarter, an improvement from the -3.9% annual rate in the year to the first quarter.
The terms of trade (ratio of export to import prices) was stronger than expected rising 4.9% in Q2 to an 18-month high.
Export prices rose 3.4%, the largest increase since Q1 2011. Import prices fell 1.5% for the fourth consecutive quarter. The terms of trade is up 4.6% in the year to Q2, the first annual increase since Q4 2011.
The UK factory PMI jumped from 54.8 to 57.2 in August, the highest in two and a half years. There are tentative signs that the official industrial production data are improving too, with no monthly output declines recorded since
January, the longest run without a fall since 2002.
United States: No economic data due to Labor Day holiday.
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