Overheated NAB survey screams steep interest rate hikes

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The NAB business survey used to be a quite useful forecaster of GDP and its segments. These days it’s become more like a PMI, only useful for directional rather than positional judgements. To wit, this is an unprecedented boom across all metrics:

Capacity utilization has been pushed the highest measures in living memory which would normally mean steep rate hikes ahead to head off soaring inflation:

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However, I suspect the real story is captured in that “Stocks” chart. That is an inventory supercycle, similar to what is transpiring worldwide right now, and when it is over capacity utilisation will crash back to earth.

It is interesting to note that next up is a crazed capex boom:

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Or is it? Some of it is tax-incentivised pull-forward. Some of it may be misinterpreting the inventory supercycle as sustainable demand. Some of it may just be PMI-style positional rebound from last year’s crash.

Because if any of the numbers in this report are vaguely real then a radical campaign of interest rates increases is required right now.

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Full report.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.