Daily Commentary BY THE CURVE TEAM –

Business Conditions and Confidence Still Slipping

12th of December, 2018

The latest monthly business survey released yesterday was yet another data point in the tide that is turning against the RBA’s central outlook.

Australian business conditions continue to drift back from the record highs experienced earlier in the year as businesses lose confidence in the outlook. The confidence index is now running below the long run average.

The pullback in business conditions has been across the board with both trading conditions and profitability falling in unison over the month. Profitability is the biggest concern of the two after falling quite sharply the past two months to its lowest level since mid 2016.

One positive sign for the short term outlook was the uptick in the employment index. Over the medium term though this is likely to change as the employment index generally tracks profitability with a lag.

It seems that the peak could be in for this cycle as far as positive business conditions go. It is yet another indicator suggesting that the tide is turning against the RBA’s central outlook. If you missed it or want to know what the other indicator are and what it means for the outlook for monetary policy, check out yesterday’s Curve monthly Insights.

David Flanagan

Director - Interest Rate Markets