From the NAB survey today:
The results from this month’s survey remain broadly consistent with our prior view of the economy and the nearterm outlook. It points to a patchy, but sustained, improvement in the non-mining economy, with the major services sectors and construction leading the way. That said, recent negative movements in retail and wholesale conditions will be a cause for concern if they continue, and we are watching to see if they represent the start of a new trend. Beyond the near-term the outlook becomes more uncertain, as the effects of previous AUD depreciation, higher commodity exports and the housing construction cycle begin to wane. All of these factors are expected to come to a head around 2018, and the economy will likely require additional policy support from the RBA ahead of this to firm up growth and stabilise the unemployment rate.
The August NAB Monthly Business Survey is still showing solid performance in the non-mining economy, although some of the previous momentum has been lost. The RBA’s recent 25bp cut to the cash rate appears to have helped underpin business confidence, which remained impressively resilient to challenging headwinds. The business confidence index rose slightly to +6 index points in August (from +4), which is consistent with the long-run average for the series. On the other hand, business conditions (an aggregation of trading conditions (sales), profitability and employment) dropped back slightly in the month, to +7 index points (from +9), but this is still well above the long run average of +5. Both trading conditions and profitability have continued to ease from their previously very high levels. In contrast, the employment component has managed to hold onto the gains seen in recent months, although it remains the weakest of the three components.
