A further recovery in business conditions and confidence has again shown up in the latest survey of local business from the National Australia Bank.
The Greece financial crisis and the rout in Chinese sharemarkets and the slowdown in that country’s economy failed to have any lasting impact in June on business confidence, according to the NAB survey.
NAB says its business confidence index rose two points to 10, after a five-point rise in May, while its business conditions index rose five points to 11, after a two-point rise in May.
The survey of more than 400 companies was taken in the final week of June, before escalating fears of a Greek exit from the eurozone and wild fluctuations in the Chinese share market rattled global investors.
The NAB said the survey revealed responding companies were particularly upbeat on trading conditions, which jumped eight index points to a reading of 20, and forward orders, which climbed three points to five. And capacity utilisation, which reflects job market conditions, rose from 80.9% to 81.3%, according to the NAB.
NAB chief economist Alan Oster ascribed the lift in confidence to "interest rate cuts, the lower Australian dollar, better conditions and a better received federal budget".
"There also appears to have been little reaction to concerns over the Chinese equity market bubble – and its partial unwinding – and ongoing issues with Greece – although the survey was conducted prior to the escalation of Greek concerns following the recent referendum," Mr Oster said.
He said the improved confidence was broad-based across most industry groups, but warned that “growing jitters on global matters – especially in regards to China – suggests that current levels may be hard to sustain”.
But confidence did fall in retail – down 10 points, while wholesaling saw an 8 point dip, so the upbeat confidence was not evident in the one sector dealing with consumers on an everyday basis.
The improvement in business conditions were at an equal high to May 2010. Conditions in services were the strongest, while mining, wholesale and manufacturing were the weakest.
“Elsewhere, low interest rates continue to support the housing sector, and housing credit growth, while business credit has also been gaining momentum,” Mr Oster commented in his analysis of yesterday’s survey results.
“However, the consumer continues to be cautious and it was somewhat surprising that conditions in retail edged down a touch – especially as the budget’s small business tax deduction initiatives was expected to have a positive impact on retailers,” he said.
The results of the survey did not see the NAB change its outlook for the Australian economy and the bank still believes the Reserve bank has ended its rate cuttimg.
"We still see the RBA as having finished cutting – the market priced cut depends on downside surprises to our forecasts. We see the next move in rates as up – but not till late 2016 (and with a lower end point for the Official Cash rate of 3.5%). And it is worth noting that while the international volatility create risks to the downside on the forecasts, local data is pointing to upside risk,” Mr Oster wrote yesterday.
