Because its famed business survey has little relevance to the Australian economy right now:
• The business sector continued to look upbeat in the May NAB Monthly Business Survey, maintaining the apparent disconnect with a seemingly disheartened household sector. Business conditions eased modestly in May, down 1 point to +12 index points, but these levels are still well above the long-run average. The strength looks to be quite broad-based, with all industries recording positive business conditions for only the second time since 2010 – although conditions are only neutral for retail in trend terms, weighed down by the softer trends in the household sector. The moderation in business conditions this month was largely driven by softer profitability, although employment conditions also eased slightly while trading conditions (sales) held steady at fairly elevated levels. Despite easing slightly, employment conditions (trend) are holding at solid levels that are consistent with the recent improvements in employment growth reported by the ABS. That has helped to close the previous departure between the NAB and ABS measures of employment, while the NAB index suggests that we can expect solid employment growth to continue over coming months. Price measures in the Survey were stable-to-lower, with retail prices moving back into negative territory, while input cost inflation was steady and final product prices eased (from already subdued levels).
• Business confidence has been less buoyant than business conditions, suggesting that there are some peripheral factors still weighing on firms’ perceptions of the operating environment. Confidence briefly caught up with conditions in April, but that was quickly unwound this month. That said, confidence is still modestly above long-run average levels. The business confidence index fell 6 points in May to +7 index points – compared to a long-run average of +6. Other leading indicators were generally encouraging, with the capacity utilisation rate rising, despite some pull-back in capital expenditure, while forward orders were steady in positive territory for the month.
