Australia: Business conditions strengthened, confidence edge higher - Westpac

Andrew Hanlan, Senior Economist at Westpac, notes that the NAB Australian business survey reported that business conditions strengthened in June, led higher by the construction and manufacturing sectors, while confidence edge higher.

Key Quotes

“In June, the conditions index rose 4pts to 15, more than reversing the 3pt decline spread over the previous two months. This is well above the long-run average for this series, of +1 (dating from 1989), but below the highs of 2007 ahead of the GFC.”

“The components of business conditions for June were: trading conditions up 6pts to +21; profitability up 5pts to +15; and employment conditions held onto earlier gains, steady at +7.”

“Business confidence moved higher, edging up 1pt to +9. Confidence has improved since 2016 and is at above average levels, although it continues to trail conditions.”

“Directionally, the survey suggests that the Australian economy is experiencing a trend improvement in underlying conditions after the slowdown in mid-2016, which was associated with the July Federal election.”

“By industry, a trend improvement in business conditions is evident in mining (supported by higher commodity prices); construction (as the mining investment drag reduces and with a boost from public works and commercial building); manufacturing (benefitting from construction, mining, agriculture and the lower AUD); as well as wholesale and transport & utilities. Conditions in finance, business & property have cooled, as lending conditions for housing have tightened. As to the consumer sectors, recreational & personal has moderated, while the previously very weak retail sectors has recovered somewhat.”