Australia Building Permits, Profits Drop, Sending Currency Lower

Australian home-building approvals unexpectedly fell for a second month in January, led by a slump in apartments, while company profits dropped in the fourth quarter as earnings weakened at mining and manufacturing firms.

The number of permits granted to build or renovate houses and apartments declined 2.4 percent from December, when they fell a revised 1.7 percent, the Bureau of Statistics said in Sydney today. The median forecast was for a 2.8 percent gain in a Bloomberg survey of 21 economists. Gross operating profits dropped 1 percent from the third quarter, matching estimates.

The Australian dollar, which slipped to the lowest since October after the data, has been squeezing the economy, prompting the Reserve Bank of Australia to lower borrowing costs to match a half-century low of 3 percent. Governor Glenn Stevens and his board, who meet to decide on interest rates tomorrow, are seeking to buoy industries including construction to rebalance economic growth and extend 21 recession-free years.

“Fourth-quarter data confirm the economy lost steam in the second half of 2012,” said Katrina Ell, an economist at Moody’s Analytics in Sydney.“Company profits, capital spending and construction have all disappointed. With fourth-quarter gross domestic product growth likely to surprise on the downside, we expect at least one more rate cut in the second quarter.”

Inventories, which feed into GDP, rose 0.2 percent, the data showed. Economists had forecast a 0.6 percent gain.

The local dollar traded at $1.0173 at 12:41 p.m. in Sydney from $1.0192 before the release.

Inventories Rise

Building approvals rose 9.9 percent from a year earlier, the report showed; economists’ forecast an 8.1 percent gain. Approvals to build private houses rose 3.2 percent to 7,484 in January from the previous month, while approvals for apartments and renovations slumped 9.1 percent to 5,251.

Traders are pricing in a 17 percent chance Stevens will tomorrow cut the benchmark rate to a record low 2.75 percent, according to swaps data compiled by Bloomberg.

Profits at mining companies fell 3.7 percent from the prior three months, manufacturers declined 6.3 percent, and construction slid 1.9 percent, the data showed. Profit at retailers climbed 5.1 percent from the previous quarter.

Gross operating profit measures earnings before tax, interest, depreciation and amortization. It excludes asset sales and foreign-exchange gains or losses.

BHP Billiton Ltd., the world’s biggest mining company, last month reported a 58 percent decline in first-half profit, joining rival Rio Tinto Group in posting a drop in earnings as waning global growth last year prompted lower prices and led some miners to slow expansion.

Strong Currency

Coca-Cola Amatil Ltd., Australia’s largest soft-drink bottler, posted full-year profit that missed analyst estimates after taking A$146 million of writedowns on its packaged food business. Net income fell 22 percent to A$460 million in 2012, the Sydney-based Coke bottler said in a Feb. 19 statement.

Australia’s currency has remained above parity with the U.S. dollar for eight months, the longest stretch since it was freely floated in 1983, propelled by a mining boom and central bank asset purchases in major developed nations. The RBA has cut rates by 1.75 percentage points in the 14 months through December to 3 percent, matching a half-century low reached during the 2009 global recession. It left borrowing costs unchanged last month.

Australia’s economy probably grew 0.6 percent in the fourth quarter from the prior three months, and 3 percent from the year earlier period, a separate Bloomberg News survey showed before a March 6 government report.

The central bank has said there’s evidence its rate reductions are beginning to take effect.

“There is a good deal of interest rate stimulus in the pipeline,” Stevens said Feb. 22 in semiannual testimony to a parliamentary panel in Canberra. “It is having an effect.”

A separate report today from Australia & New Zealand Banking Group Ltd. in Melbourne showed the number of job advertisements climbed 3 percent in February from January, a second monthly increase.

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