Daily Commentary BY THE CURVE TEAM –

Business Boom, Consumer Struggle

12th of April, 2017

Business conditions are the best since GFC amid more signs consumers are under pressure.

The NAB released their monthly business survey yesterday and the bounce in business conditions to a post GFC high stole the headlines. Confidence on the other hand was down, which is hard to reconcile.

After a small pullback last month, business confidence bounced back to a post GFC high with the index up 5 points to 14. Trading conditions continue to be the big driver with the biggest mover by sector, mining, being driven by the bounce in commodity prices. Another positive from the conditions index was the employment sub index held onto its recent pick up, pointing to improved employment outcomes over the months ahead.

Despite the best business conditions since early 2008, business confidence is still somewhat circumspect. The business confidence index slipped 1 point to 6 in March to sit right around the long run average. There could be a number of factors influencing this from concerns over the international outlook to the increasingly toxic political environment locally.

The survey also provided further evidence that consumers are under pressure. Within the condition index, retail conditions fell back into negative territory, reinforcing the trend that has been in place since last year. Retail prices were also down on a quarterly basis, which not only has implications for inflation but suggests retailers have even less pricing power.

It will be interesting to see if today’s consumer sentiment shows that consumers are still overwhelmingly concerned with their finances when it is released later this morning.

David Flanagan

Director - Interest Rate Markets