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Free AccessANALYSIS: NAB Survey Shows RBA Consumption Worries to Linger
--Survey Indicates Renewed Softening in Retail Conditions, Prices
By Sophia Rodrigues
SYDNEY (MNI) - National Australia Bank's monthly business survey showed
conditions and confidence remain elevated but a renewed softening in retail
conditions and prices show the Reserve Bank's top concern about household
spending and subdued retail inflation are unlikely to dissipate.
This means risks to growth and inflation forecasts in the RBA's recent
quarterly Statement on Monetary Policy remain to the downside -- unless the
strength in business conditions results in stronger overall economic growth.
NAB's July business survey published Tuesday showed business conditions
were three times the long-run average and business confidence improved to twice
the long-run average.
But details in the survey were not as strong -- with profitability the only
measure to improve in July. Employment conditions were unchanged, trading eased
slightly, exports turned negative and forward orders fell.
One big concern was a retreat in retail conditions with this sector once
again the worst performing in the survey. Also worrying was a weakening in price
and wage measures with retail prices once again turning negative and labor costs
slowing.
Leading indicators were also less upbeat with capital expenditure falling
and forward orders softening and capacity utilization unchanged.
NAB's chief economist Alan Oster said the persistent strength in employment
conditions has made him a little more optimistic about the near-term outlook for
the labor market but there are still longer-term challenges to domestic demand
-- which will have implications for the labor market.
"We remain apprehensive about how the disconnect between the business and
consumer sectors will be resolved -- especially in light of sluggish retail
conditions in July. Additionally, the previously emphasized hurdles to growth --
elevated underemployment, household debt and peaks in LNG exports and housing
construction -- remain firmly in place. These factors will weigh on the
longer-term economic outlook following a reacceleration of growth in coming
quarters from the temporary disruptions to activity seen earlier in the year,"
Oster said.
However, Oster is of the view that the balance of risks for NAB's view for
the RBA cash rate to remain unchanged for an extended period may change if the
recent strength in employment growth and business conditions are maintained.
Below is the table from the survey for July published Tuesday:
July June
------------------------------------------------
Business Confidence +12 +8
Business Conditions +15 +14
Employment +7 +7
Profitability +18 +14
Trading +20 +21
Exports -1 +2
Forward Orders +3 +5
Stocks 0 +4
Capital Expenditure +5 +13
Retail Prices (quarterly rate %) -0.1 +0.3
Labor costs (quarterly rate %) +0.6 +1.1
Final products prices (qtrly rate %) +0.2 +0.5
Capacity Utilization (%) 81.9 81.9
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com
[TOPICS: MTABLE,MMLRB$,M$A$$$,M$L$$$,MT$$$$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.