Daily Commentary BY THE CURVE TEAM –

Business Outlook Wilting

29th of January, 2020

Business outlook continues to slide according to the latest monthly survey.

Confidence amongst the business sector continued to slip going into the end of 2019. The index fell below 0 to -2 in December, the weakest result since July 2013. It is a continuation of the trend that has been in place since mid-2018, after strong confidence in the preceding 12 months.

Business conditions have been little-changed now for most of 2019, with the index hovering between 1 and 7 over the course of the year. The latest read of 3 was a little disappointing, with forward orders and capacity utilisation both falling from the month earlier. Capex intentions also appear to be easing.

One bright spot from the survey was the employment index, which remained largely unchanged above the long-run average over the last three months of the year. At its current level, it suggests that employment growth should remain okay over the coming months.

It is worth noting that the survey preceded the intensification of the bushfire season and the outbreak of the CoronaVirus offshore. Both of these are likely to have an economic impact over the months ahead, which could impact both business confidence and conditions when the January survey is released in two weeks time.

The focus will now shift to the inflation data for the fourth quarter, which is due at 11:30 this morning. Markets expect the headline index to rise 0.6% for the quarter, leaving the annual rate unchanged at 1.7%. The trimmed mean is expected to rise 0.4%, leaving the annual rate down 0.1% to 1.5%.

David Flanagan

Director - Interest Rate Markets