Rate Cuts Yet To Feed Into Business Conditions, Confidence

By Glenn Dyer | More Articles by Glenn Dyer

No good news for the Reserve Bank or the Federal Government from the July survey of business conditions and confidence from the National Australia Bank.

There has been no sustained bounce from the result of the May 18 federal election and if anything the economy is slower and slower since then.

Retailing remains the standout black hole (Remember the NAB called a recession for the retail sector in its May survey).

The July survey shows more of the same – business conditions confirming the economy is slowly stagnating and confidence going nowhere with any certainty.

“Broadly the picture from the business survey is unchanged from last month,” The NAB said in yesterday’s commentary with the monthly report.

“(T)he key message being that the business sector has lost significant momentum since early 2018 and that forward-looking indicators do not point to an improvement in the near term.

“In the month, conditions edged lower but remains within its range over the past 4 months. Confidence ticked up after a sharp fall last month and a period of volatility around the Federal Election.

Business conditions fell 2 pts to +2 index points in July, driven by a decline in the employment sub-index while business confidence edged higher in the month to +4 index points. The NAB said both remain below average.

“Forward orders are well below average (and negative), while capacity utilisation is now back around average – pointing to little improvement in the short-term.

“The decline in conditions and capacity utilisation appear to have fed into business decisions with the employment index and capex also weakening over the past year.

“Weakness in the retail industry continues to stand out, with conditions in that industry at recessionary levels – and declining further in the month. A worrying result, given we expected some boost to the industry following the post-election tax cuts.

“More broadly, the lift in confidence following the election appears to have faded with little impact on actual conditions. It appears that both the cut to interest rates and boost to tax rebates is yet to feed into the business sector and that the weakness in Q2 has persisted into Q3.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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