NAB Business Survey cruises along

The NAB Business Survey for July is out and it continues to cruise along, albeit weakening from June:

Business sentiment has shown great resilience to external shocks in the July NAB Monthly Business Survey, with firms choosing to remain focussed on the positive trends within their own business. Despite the cacophony of events – including Brexit and the recent Federal election – that have posed a risk to market sentiment in the past month or so, firms are continuing to report positive levels of business confidence (albeit a little below average levels). The business confidence index eased slightly to +4 index points in July (from +5), which is modestly below the average of +6. The resilience of business confidence appears to stem largely from the fact that firms are still experiencing very elevated levels of business conditions – noting that the Survey was also conducted prior to the RBA recent decision to cut the cash rate 25bps.

Business conditions dropped back as well in July, to +8 index points (from +11), but this is still quite an elevated level that sits well above the long run average of +5. The contribution from major industries suggest a relatively mixed bag, with service sectors continuing to be the best performers. Signs of a broadening recovery in recent months have again become more obscure following sharp deteriorations in transport and wholesale – although a recovery in retail conditions was encouraging. While trading conditions and profitability have been the main driver of elevated business conditions, both of these contributed to the deterioration during the month. Encouragingly, the employment component managed to hold onto the gains seen in June, suggesting ongoing employment growth. Inflation measures in the Survey generally stayed soft, although there was a surprise spike in retail prices.