Business conditions recorded a sixth consecutive below-average month, pointing to ongoing weakness in the business sector. In the month, conditions edged up 1pt and confidence edged lower. While both conditions and confidence remain below average levels +6 index points – the broadbased trend decline since mid-2018 appears to have slowed. In the month, profitability and trading conditions remained below average, contrasting with the employment index, which edged up and is now above average. This mirrors official data that show ongoing strong employment growth but subdued consumer spending. At present, retail and wholesale (the goods distribution industries) are weakest – a reflection of conditions in the household sector. Manufacturing and construction are also weak, reflecting the dynamics in the housing sector and possibly some impact from global trade turmoil. Forward indicators remain mixed, but overall suggest that conditions are likely to continue a below-average trend. Likewise, price indicators suggest inflationary pressure is likely to remain weak. Recent rate cuts as well as the tax refunds appear to have driven some improvement in the retail sector, but with conditions remaining deeply negative it is unlikely to have been enough support to see a material turn-around in the sector.
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