National Australia Bank June Business Survey
Please note, the priors have been revised:
Business conditions 15 ... super-strong for this indicator
- prior 11
Business confidence 9
- prior 8
Key points from this month's survey from NAB:
Business conditions at +15 index points - back to around pre-GFC levels and well above the long-run average
- Most industries are performing well in the Survey ... although condition in the mining sector have dropped back into negative territory reflecting movements in major commodity prices
- In contrast, the retail sector is finally showing an improvement, although it is still notably softer than most other industries in the Survey
- The lift in business conditions this month was largely driven by stronger trading conditions (sales) and profitability, suggesting a much needed lift in demand, while employment conditions were steady
- Although they did not improve, employment conditions are at levels that would indicate enough employment growth to lower the unemployment rate over coming months - and is consistent with reads on the labour market reported by the ABS
- That said, other indicators, such as the underemployment rate, suggest there is still a fair degree of slack in the labour market, which is weighing on wages growth. Nonetheless, price measures in the survey suggest a slight lift in wages costs, while other price pressure rose as well. Retail prices jumped back into positive territory and are more consistent with the bottom of the RBA's inflation target band
Business confidence has lagged behind business conditions for a long time, and that trend continued in June.
- The business confidence index rose by a more modest 1 point in the month, to be at +9 index points, although that is still well above the long-run average for the series (+6) and is an encouraging outcome in terms of its implications for employment and capital expenditure
Other leading indicators were upbeat
- Capital expenditure rebounding, despite some pull-back in capacity utilisation rates, while forward orders drifted up further for the month
The divergence between the household and business sectors continued into June. That said, the retail industry is showing some signs of improvement, which along with better than expected retail sales and employment growth in May, could mean the disparity will resolve itself in a favourable manner.
There are, however, still significant hurdles to be overcome as the ongoing slack in the labour market (keeping wages growth subdued), and record levels of household debt, pose a significant long-term headwind to consumer spending. We expect economic growth to accelerate in H2 2017, following weather related disruptions in H1 this year, but the longer-term outlook could easily underperform the RBA's upbeat expectations as important growth drivers (LNG exports, commodity prices and housing construction) begin to fade. Given the risks to the outlook, signs of moderation in the housing market, and a reluctance to see the AUD strengthen further, the RBA should be content with keeping interest rates on hold for an extended period. Recent data flows have however been more encouraging, and if maintained could raise the prospect of a change in the balance of risks.
I circled the major June results - all higher
Another strong survey result. Check out that final paragraph from NAB - a good outline of where we are and what the risks are.
Reading between the lines ....more muddling along for the Australian economy.
And, after all this ... AUD is somnolent ... sleepy response indeed.
