Australian businesses continues to do well, according to the latest National Australian Bank monthly survey.
The results of the survey do take into account the Brexit vote on June 23, and market volatility straight afterwards which now seems to be easing.
But they do not include the uncertainty generated by the July 2 poll, which now also seems to be easing.
NAB said its business conditions index rose two points to 12 in June, while the confidence index was ahead three points to six over the month.The trading index held steady at 18 points, while profitability crept up one point to 12.
All in all Australian business enjoyed some of the best conditions since the GFC, according to the NAB, and that may be enough to see the RBA sit on its hands when it next meets early next month to decide on whether to cut the cash rate.
Tomorrow’s June jobs report will be important, as will the June quarter consumer inflation data, out in a fortnight, but the resilience of business could be quite convincing to the RBA.
Certainly the NAB at the moment thinks the bank won’t cut rates, but admits it will be a “close” decision and will depend especially on the CPI in a fortnight.
NAB chief economist Alan Oster said yesterday the results of the survey, taken in late June, suggested that companies were “looking through external uncertainties, choosing to focus on the positives they see in their own business, at least for the time being”.
“(We) are very much seeing a continuation of the positive trends evident in the Survey for some time now”.
Most industry groups reported a pick-up in conditions, although retailers were a "notable exception", NAB said, with a sharp, 13-point drop in the headline index to negative seven. Prices in the sector dropped into negative territory, after an 0.5% increase between April and May (deflation again).
"The deterioration in retail coincides with big declines in retail price growth, highlighting the competitive and cost pressures facing the industry," Mr Oster said.
"However, we should be able to take comfort in the trends we are seeing across many other industries."
Confidence either improved or held steady in most industries, with retail again an exception, along with construction, which has been buffeted recently by tighter controls on investor lending and reports of oversupply in some cities.
Employment rebounded after slumping in May, and forward orders rose to four index points after languishing at two in April and May. Exports were also slightly ahead, but stocks dropped away.
Despite the generally positive tone of the survey, NAB cautioned that consumer price growth was still weak.
"Overall, the survey suggests the RBA should be reasonably comfortable with the present state of economic activity, even in the wake of recent events that cloud the outlook," the bank said.
"However, the view on inflation is arguably more important at this juncture, and the survey is not suggesting any meaningful turnaround in near-term inflation pressures.
“These trends justify the highly accommodative setting for monetary policy.
"Australian real GDP continues to be supported by solid non-mining activity and strong growth in the volume of LNG and services exports. Consistently above-average business conditions in non-mining appear to supporting business confidence (despite Brexit), which is encouraging as we enter a period of political uncertainty,” the NAB said yesterday.
