Australian Markets Weekly
Speaking with clients in Adelaide last week, it was something of a surprise that the NAB Business Survey improved further in July, with NAB Business Conditions making some further ground to now be above its long term average.
Confidence and business conditions stabilise
Speaking with clients in Adelaide last week, it was something of a surprise that the NAB Business Survey improved further in July, with NAB Business Conditions making some further ground to now be above its long term average. South Australia was also part of that better NAB Business Conditions story in July.
The NAB Business Conditions index – a coincident indicator of domestic demand – accelerated in July to the highest reading since March 2010. While this is the first above-long term average reading on conditions for some time, it’s a sign of some rise in the growth of domestic demand through this half.
Some increase in retail business conditions was evident, as it was in wholesaling, and construction (especially apartments). Even manufacturing contributed, growth across some of these weaker industries overshadowing a pull-back in mining back to its lows of this cycle.
NAB Business Confidence continued its run at or above its long term average since last August, gaining more ground in July.
It was notable that the further rise in business confidence was underpinned by a surge in retail industry confidence, a strong hint of an improvement in retailing in July.
While counter-intuitive to continuing mixed business anecdotes across the country, the July NAB Business Survey is a welcome sign nevertheless.
Of course, as a survey of 400 companies, it is subject to survey statistical health warnings from some inevitable volatility and we await a further indication from next month’s reading.
Consumers feeling less anxious too
While business confidence has risen and held up through this past 12 months, the same cannot be said for consumer spirits that have been worsening until quite recently. Over recent weeks we’ve seen some recovery in the weekly Roy Morgan measure of consumer confidence, confirmed in last week’s monthly Westpac-Melbourne Institute measure.
The further decay on consumer confidence that commenced in the lead up to the Federal Budget had continued after the Budget and until recent weeks had continued to drift. That changed over the course of the last month with encouraging signs of some stability in consumer spirits, though there remains something of a divergence from business confidence.
We know that the pre and post Budget decline in consumer sentiment has been weighing on the mind of RBA Governor Stevens and has until recently been unhelpful to restoring growth in consumer spending as resource investment winds back.
This Wednesday morning’s RBA testimony to the House Economics Committee will provide the opportunity for MP’s to quiz the Governor and his senior team closely on the economy’s recent trends and prospects.
Week ahead – RBA
RBA events highlight this week, with the Minutes of the August Policy Meeting tomorrow and the RBA Governor’s semi-annual testimony to the House of Representatives’ Standing Committee on Economics in Brisbane on Wednesday.
The Minutes are unlikely to provide too much new, coming on the heels of the just-released August Statement on Monetary Policy, but the Governor’s testimony may well be more enlightening, the Statement having been superseded by key data over this past fortnight. The RBA did revise down its GDP and inflation forecasts, and we will be looking for any hints in the Minutes that the Board may have contemplated moving from a neutral policy bias at the August meeting.
The Governor will have the opportunity to also comment Wednesday on the most recent data, the improvement in business and consumer confidence as well as improving business conditions.
It’s very quiet on the local data front this week. July motor vehicle sales today, the weekly Roy Morgan consumer confidence tomorrow morning and skilled vacancies on Wednesday highlight the second-tier releases.