Business confidence increased marginally in July despite a fall in business conditions, according to the latest survey from NAB. The bank’s monthly business confidence index rose 1 point that month to +7, while the conditions index fell by 2 points +12.
“Despite falling over recent months, business conditions remain above average, suggesting favourable conditions have continued to persist through the middle of 2018,” NAB group chief economist Alan Oster said in a statement. “The weakness in the month was driven by deterioration in both profitability and trading conditions, which was partially offset by a rise in the employment index.”
The month had a “welcome rebound,” according to Oster. NAB’s mapping of the employment index to the official employment statistics indicate “employment will grow at a stronger rate than the working-age population over the second half of 2018, which would see the unemployment rate gradually decline.”
Conditions in the construction industry rose quite sharply in July, while recreational and personal services and wholesale experienced small improvement. The retail industry declined further in the month.
Oster pointed out that when it comes to trend terms, conditions in the mining industry remains highest; a likely reflection of last year’s unexpected high commodity costs, increased productivity, and lesser cost pressures. Conditions in the construction sector remain high as well; a likely reflection of the large pipelines associated with residential and infrastructure-related work. The retail sector remains the weakest, going through another decline this month.
Surveyed wage and price measures increased in July, although this generally suggests “a continuation of the weak price pressures observed over recent years.”
“The survey continues to suggest generally weak inflation pressures in the economy, despite continued growth. Surveyed price, cost and wage measures of inflation all rose a little in the month though remain at relatively low levels,” Oster said.
For him, the overall survey results are broadly aligned with NAB’s outlook for the economy for what remains of 2018. NAB finds the business sector in relatively good health, and expects to “see enough employment growth to see a gradual reduction in spare capacity which should in time see a rise in wage growth, and a more general lift in inflation.”
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