The June NAB Monthly Business Survey was again positive for the business sector. Business conditions hit another multiyear high, with most industries performing well. Stronger trading conditions (sales) and profitability drove the improvement, while employment conditions were steady. Business confidence saw a more modest lift, but is still well above the long-run average for the series. These upbeat outcomes are in stark contrast to some of the trends evident in the household sector, but recent reads from the retail industry and labour market could see the disparity resolve itself favourably. 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 (mid 2019). That said, the recent flow of economic data has been more encouraging and, if maintained, could soon signal a shift in the balance of risk. Updated economic forecasts will be released tomorrow.
Firing on all cylinders:
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
