Australia: Solid business conditions, but business confidence has taken a hit - NAB

Australian business conditions continued their solid run in August, but business confidence has taken a hit – although recent volatility suggests we should exercise caution when interpreting the result, according to analysts at NAB.

Key Quotes

“Business conditions hit its highest level since early 2008, with most industries performing well, although retail remains a concern with conditions languishing in negative territory (neutral in trend terms). The recent run of economic data has (for the most part) been relatively upbeat, consistent with the strong results evident for some time in the NAB Business Survey. In combination with some encouraging reads on the labour market (including a jump in employment conditions in the NAB Survey), these trends could support the case to bring forward RBA rate hikes. However, there are few signs of inflation/wage pressures in the official data as yet, while relatively downbeat consumer confidence is still a point of concern (especially in light of poor retail conditions in the NAB survey).”

“Additionally, given additional hurdles from underemployment, an elevated AUD, household debt and peaks in LNG exports and housing construction, the RBA is likely to proceed with extreme caution.”