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Australian business confidence fell to the lowest level in seven years in June as cooling domestic demand and spiraling raw-material costs eroded corporate profits.

The confidence index dropped to minus 9 points from minus 4 in May, according to a National Australia Bank Ltd. survey of 335 companies. It was the weakest result since the Sept. 11, 2001, terrorist attacks in the U.S.

Record oil prices and slower economic growth have damaged global sentiment, with New Zealand companies at their most pessimistic in 33 years and European investor confidence dropping by a record amount. Australian retailer Just Group Ltd. and builder Mirvac Group Ltd. reduced profit forecasts in the past month as interest-rate increases buffet consumer spending, while Qantas Airways Ltd. has cut routes and fired workers.

“The bottom line is for a marked slowdown in Australian economic growth,'' said Alan Oster, chief economist at National Australia Bank in Melbourne. “Activity across interest-rate sensitive areas has moderated significantly.''

Weaker confidence follows figures this week that showed job advertisements dropped the most in almost two years in June and construction work contracted. They all reinforce speculation the central bank has finished raising interest rates.

Australia's dollar traded at 95.48 U.S. cents at 12:36 p.m. in Sydney from 95.57 cents before the report was released. The two-year government bond yield fell 4 basis points to 6.71 percent from yesterday.

Less Than Zero

The sentiment index posted a sixth straight reading of less than zero, which indicates companies expecting their industry will deteriorate outnumber those seeing an improvement.

The survey's business conditions gauge fell to zero, also the lowest since 2001, from 7 points in May. The reading is a measure of corporate hiring, profits and sales in June.

Central bank Governor Glenn Stevens and his board have raised borrowing costs in four quarter-point moves since August to cool inflation that is running at the fastest pace in almost two decades.

“The Reserve Bank will remain on an inflation alert, but it will become increasingly less alarmed'' as slower growth helps quell price pressures, Oster said. “The bank will remain on hold for the rest of 2008, before lowering the cash rate during 2009.''

The rate increases boosted the nation's benchmark to 7.25 percent. Higher borrowing costs pushed consumer confidence down to the weakest in 16 years, triggering a slowdown in spending.

Shares Decline

The S&P/ASX 200 index of shares has dropped 21 percent this year, outpacing declines in benchmark indexes in the U.K., Japan and the U.S. Australia's stock index fell 0.3 percent today.

Just Group, the nation's largest specialty clothing retailer, cut its profit forecast last week as record fuel prices and higher interest rates erode sales.

Earnings-per-share will be between 29.2 Australian cents and 30.6 cents in the year ending July 31, compared with last month's forecast of 33.4 cents, the Melbourne-based company said.

Mirvac Group Ltd., a property investor and apartment builder, said on June 20 that 12-month earnings may be as much as 8.5 percent lower than previously forecast.

Qantas Airways, the nation's largest carrier, said in June that it will slash services to Japan, shift other Asian routes to low-cost unit Jetstar and cut jobs.

As domestic demand slows, a mining boom is helping shore up Australia's economy. Exports rose to a record in May as demand from China boosted earnings from iron ore and coal shipments.

“Mining conditions, if anything, have picked up since late 2007,'' Oster said. “Solid expansion in emerging-market economies, such as China and India,'' are spurring global growth.

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Japan has managed to avoid a recession because the health of the nation's companies has improved from the decade after the asset bubble burst in the early 1990s, Economic and Fiscal Policy Minister Hiroko Ota said.

“Increased strength in the corporate sector is helping Japan stay on the cliff when the economy is being jolted by big waves from overseas,'' Ota said in an interview in Tokyo yesterday. Companies have shed debt, cut bloated workforces and got rid of extra capacity, she said.

The Bank of Japan's Tankan survey this week showed confidence among the largest manufacturers fell to a four-year low. The survey also showed that the labor market remains close to the tightest it's been in 16 years and there are few signs of the idle production capacity that contributed to Japan's three recessions since 1990.

“The economy is in much better shape than at similar stages in previous downturns,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London. There is “little sign of the excess capacity or labor hoarding that might lead to a recession.''

Ota, 54, said her biggest concern is that manufacturers may be building up stock of technology-related products that may lead to a drop in production should global demand decline.

Inefficiency among service companies, which make up 70 percent of the economy, is preventing them from raising wages and that's weighing on consumer spending, Ota said.

Stalled Wage Growth

The stalled wage growth is a reason households aren't spending and “that's why Japan doesn't have a risk of secondary inflation,'' Ota said. Japan's core consumer prices rose 1.5 percent in May from a year earlier, though mostly because of costlier imported oil and commodities.

That cost-driven inflation is prompting households to buy less. A record 58.7 percent of consumers plan to reduce spending in the next 12 months, a Bank of Japan survey showed today. An unprecedented 88.9 percent of respondents expect prices to rise this year.

Record energy prices are hurting companies as well. The Nikkei 225 Stock Average fell for a 12th day today, capping the longest decline since 1954, when the end of the Korean War caused a slump in Japanese industrial sales to the U.S. military.

Ota, who had been saying U.S. economy will recover in the second half of this year, said a pickup in the world's largest economy may be “delayed'' because home prices are still falling.

Japan needs to maintain its pledge to balance the budget by 2011 and should only raise taxes if spending cuts and increases in revenue aren't enough to fund social welfare costs, she said.

After 2011, the government will need to commit to a numerical target to reduce the nation's ratio of debt to gross domestic product, the minister said. Prime Minister Yasuo Fukuda's economic advisory panel will start discussing the target from this autumn, she added.

The Organization for Economic Cooperation and Development estimates the ratio stands at 180 percent, making Japan the most indebted nation in the industrialized world.

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Total personal income grew faster in New York during the first quarter of 2008 than anywhere else in the Northeast, according to a new report from the U.S. Bureau of Economic Analysis.

New York’s total personal income (TPI) equaled $950.8 billion in the first quarter, which was up 2.5 percent from the fourth quarter figure of $927.4 billion.

No other Northeastern state experienced income growth of more than 1.4 percent. New York, in fact, outperformed all other states but North Dakota and South Dakota. The former led the nation with a TPI increase of 7.6 percent between the fourth quarter of 2007 and first quarter of 2008.

TPI is the measure of all money earned by all residents of a state during a given year. It covers wages, interest, dividends, rental receipts and Social Security payments, among other sources.

Wall Street was largely responsible for New York’s sharp rise in TPI.

"Sizable performance bonuses for 2007 in the finance industry accounted for New York’s strong personal income growth, more than double national nonfarm growth," said the Bureau of Economic Analysis report. "Because many of the recipients of the bonuses live in Connecticut and New Jersey, personal income of those states was boosted slightly as well."

The large rises in the Dakotas were caused by strong upswings in prices for grain, especially corn.

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Retail stores nationwide will be cutting prices on food and beverages to cushion the financial pain of soaring gasoline prices, according to the National Retail Federation.

The Washington D.C.-based trade organization’s survey showed almost 60 percent of consumer respondents said spiraling fuel prices will exercise a downward effect on their holiday spending.

Only 42 percent said the same thing in a survey a year ago.

"Americans will continue to commemorate Independence Day this year, though higher gas prices will impact how they celebrate," NRF President and CEO Tracy Mullin says in a statement. "Retailers are aware of the strain gas prices have on consumers’ wallets and will be offering special promotions on food and beverages for the millions of people planning summer barbecues."

That may help the 61 percent of survey respondents who said they plan to barbecue or attend a cookout during the holiday. Forty percent said they will go to a fireworks display, 10 percent will view a parade and 11 percent say they will take a vacation.

"A traditional Fourth of July trip to the beach or amusement park will be more expensive than it has ever been," says Phil Rist, vice president of strategy at BIGresearch, which conducted the survey of 8,351 consumers from June 3 to 10. "Instead of making elaborate travel plans, many consumers will choose to spend the holiday closer to home with family and friends."

www.nrf.com

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Royal Bank of Canada's Voyageur Asset Management arm will buy some assets of Boston-based Access Capital Strategies, it said Tuesday.

Terms of the transaction were not disclosed. The acquisition is subject to regulatory approvals.

Access Capital, which has more than $650 million in assets under management, serves as an adviser to banks, foundations, endowments and community trusts. It manages the Access Capital Strategies Community Investment Fund, which invests in debt securities that support community development serving low- and moderate-income individuals and communities.

Voyageur is based in Minneapolis and has $34 billion in assets under management. It said the acquisition will help RBC to build a U.S. presence and increase its activities in socially responsible investment assets.

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CKE Restaurants Inc., parent company of St. Louis-based Hardee's Food Systems Inc., posted positive same-store sales for the fourth period and the first quarter of fiscal 2009, although same-store sales at its Hardee's units declined.

CKE reported Wednesday that Hardee's same-store sales decreased 1 percent for the four-week period ended May 19, referred to as period four by the company. That compares to a 0.6 percent increase in sales during the same period in fiscal 2008. Hardee's first-quarter same-store sales for the 16-week period ended May 19 were down 0.6 percent, compared to an increase of 1.8 percent in the first quarter of fiscal 2008.

Same-store sales are a key measure of retail health that highlight the comparative performance of stores open at least one year.

Same-store sales at CKE's Carl's Jr. restaurants were up 4.2 percent during period four, compared to a decrease of 0.9 percent in the same period the prior year. In the recent quarter, Carl's Jr. saw its same-store sales climb 3.9 percent, compared to flat sales in the first quarter of fiscal 2008.

Blended same-store sales for Hardee's and Carl's Jr. restaurants were up 1.8 percent in both period four and the first quarter of fiscal 2009. CKE's blended same-store sales fell 0.1 percent in last year's period four and rose 0.9 percent for the prior year's first quarter.

For the 16-week first quarter of fiscal 2009, revenue from company-operated Hardee's restaurants was about $162.9 million, and revenue at company-operated Carl's Jr. locations was about $195.3 million in the same period. Both figures exclude franchise-related revenue and royalties.

St. Louis-based Hardee's Food Systems Inc. operates 1,926 restaurants. It is a division of Carpinteria, Calif.-based CKE Restaurants Inc. (NYSE: CKR), which also operates Carl's Jr. restaurants.

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Producer prices in Spain accelerated more than economists expected in April to the fastest pace in 13 years as higher oil increased cost pressures for manufacturers.

The price of goods leaving Spain's factories, farms and mines rose 7.2 percent from the year earlier period after a 6.9 percent increase in March, the National Statistics Institute in Madrid said in an e-mailed statement today. That exceeded the 6.9 percent median forecast in a Bloomberg survey of four economists. Prices rose 0.8 percent on the month.

The price of crude has more than doubled in the past year and touched a record $135.09 a barrel in New York last week. Surging energy prices helped push euro-region consumer-price inflation to 3.3 percent in April, exceeding the European Central Bank's 2 percent ceiling for a eighth straight month.

“Energy prices saw the biggest increase,'' Jose Luis Martinez, a strategist at Citigroup Inc. in Madrid, said. There is a sense of “pessimism in looking at the economic data out of Spain.''

The price of gasoline leaving refineries in Spain increased 29 percent on the year while food prices were up 11 percent.

Spain's consumer price inflation, measured according to EU standards, rose 4.2 percent on the year in April.

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Officials of BAE Systems Plc have told a U.S. court that a shareholder lawsuit charging illegal bribes were paid to win a Saudi arms deal worth up to $80 billion should be heard by a British court, not the U.S. court.

In court papers filed late on Friday, the BAE defendants urged a U.S. federal judge to quash a suit by a U.S. pension fund with shares in BAE, Britain’s top arms company. The suit charged they breached their fiduciary duties by allowing more than $2 billion in illegal bribes to Saudi Prince Bandar bin Sultan and others in the 1980s.

A lawyer for Bandar, a former Saudi ambassador to the United States who now heads Saudi Arabia’s national security council, could not be reached for comment.

BAE and Bandar have strongly denied that wrongful payments were made to help secure the arms deal known as al-Yamamah, or “the Dove,” in which Tornado fighter jets and other military hardware were sold to Saudi Arabia in the 1980s.

Britain’s Serious Fraud Office dropped an investigation into the matter in December 2006. Then-Prime Minister Tony Blair said the investigation would damage national security.

In April, a British court ruled in favor of anti-arms trade campaigners that the investigation into allegations of bribery in arms deals with Saudi Arabia was ended unlawfully. The issue is on appeal to the House of Lords, Britain’s highest court.

Lawyers for the defendants, including BAE’s chief executive Mike Turner and board chairman Richard Olver, argued in the U.S. District Court that the British court’s ruling showed there “are live issues in England … properly addressed under English law.”

The shareholder suit was brought in September 2007 by a pension fund for employees of Harper Woods, Michigan. Defendants include all BAE board members plus several of the company’s current and former top executives. 

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