Australian business conditions eased slightly in May, but are holding up at elevated levels explains the research team at NAB.
“The business conditions index fell 1 point, to +12 index points, which is well above the long-run average (+5). In contrast, business confidence is looking less buoyant, although it has remained above long-run average levels. The confidence index dropped 6 points in May, to +7 index points – compared to a long-run average of +6 for the series.”
“The May NAB Monthly Business Survey again pointed to an upbeat business sector, indicating an apparent disconnect with a seemingly disheartened household sector. Despite easing modestly in May, business conditions are still at very elevated levels, while solid trends across most states and industries are encouraging. Employment conditions are holding up well and are consistent with the recent improvements in employment growth reported by the ABS and suggests that we can expect solid employment growth to continue over coming months.”
“Business confidence meanwhile unwound, after briefly caught up with conditions in April, although remains above its long run average. How the disparity between business and household conditions resolves itself will be critical to the outlook for growth. We continue to expect economic growth to accelerate in H2 2017, following weather related disruptions in the first half of the year, but the longer-term outlook is less certain as important growth drivers (LNG exports, commodity prices and housing construction) begin to fade. Despite that, the RBA’s emphasis on financial stability concerns is expected to keep them on hold for the foreseeable future.”