Daily Commentary BY THE CURVE TEAM –

Business Conditions and Confidence Consolidate

10th of October, 2018

Both business conditions and business confidence have consolidated after softening in recent months. However the sub components paint a slightly different picture.

The latest business survey saw both business conditions and business confidence little changed from a month ago. Businesses continue to enjoy robust operating conditions, albeit a little lower than a few months ago, thanks to low mortgage rates and solid population growth. Meanwhile business confidence has consolidated around the long run average after slipping in recent month.

Of the subcomponents, the key ones to keep an eye on are the employment index and retail conditions for any impact stemming from falling house prices.

The employment index remains above the long term average which bodes well for employment growth over the month ahead. It is at odds somewhat though with the jobs ad report which has stalled in recent months.

Retail conditions are under pressure with trading conditions and profit subcomponents of retail conditions firmly in negative territory. The retail employment index has held up ok despite the weak operating conditions.

For now the data suggests that the fallout from falling house prices is largely contained. How retail conditions and the overall employment index track over the months ahead could tell us a lot about expectations for the outlook and the impact the deterioration on the housing market is having on the broader economy.

David Flanagan

Director - Interest Rate Markets