Monthly Business Survey

Key June 2010 Survey results:

Confidence broadly unchanged as conditions edge higher

• Business confidence was relatively steady following last months large falls. Further falls in mining (survey predated the change in the mining tax) and manufacturing confidence were offset by better readings in retail and wholesale confidence.
• Business conditions moved higher on the back of better performances in trading (especially mining). Profitability also improved. Overall retail conditions remained at relatively weak levels, while very strong conditions continue to be reported in mining, construction and finance.
• Forward orders and capacity utilisation edged higher while stocks were run down. Overall the survey continues to point to underlying demand growth of around 4%. Retail prices were lower indicative of further discounting while wages continues to move higher. Credit was a little easier.
• The Survey was conducted in the week ending 30 June and included the change of Prime Minister (24 June) but not the revised minerals tax arrangements (2 July).

Implications for NAB forecasts:

• Global growth forecast increased to 4½% in 2010 and 4¼% in 2011 - mainly due to surging Latin America (Brazil). Beyond that India, China and other East Asian economies continue to drive the recovery. US data imply slower growth but we still expect a touch over 3% in 2010. But European prospects remain extremely weak – with the risk of contagion still high. But double dip still seen as unlikely.
• Australian activity forecasts unchanged following last month’s downward revision. Indeed the Survey reinforces the view that growth is still reasonable. GDP growth of 2¾% in 2010 and 3½% in 2011 expected. Unemployment of 4¾% in late 2010 and 4½% by late 2011.
• Interest rates on hold until late 2010, then two rises to 5% by end year (and a peak of 5½% in mid 2011). Inflation revised up to 3% by end 2010 and 2¾% in 2011.

Download NAB Monthly Business Survey - June 2010