Daily Commentary BY THE CURVE TEAM –

Businesses Exuberant

10th of May, 2021

Results from the latest business survey are astoundingly positive.

April’s business survey results easily beat previous records. Confidence was up to 26 from 17 and conditions to 32 from 24.

March’s business survey results were record highs for conditions and confidence, so the further strong increases put the survey at staggering levels. Very encouraging was the employment index, which again improved from 15 to 22.

This is significant, as business hiring should offset any effects from the end of JobKeeper. Evidence of inflation remains subdued, with retail prices and purchases costs down slightly as well as final product prices only up marginally.

Speculation that a resurgent economy will flow through to prices has been rife for months, but it is yet to flow through in the data.

Retail sales data was also released yesterday for March. Sales were up 1.3% for the month, which leaves them 2.2% higher than this time last year.

This is particularly impressive, given March last year saw a spike in spending before lockdowns were imposed. Next month the annualised figure will include the subsequent fall in spending in April 2020, so will be very elevated.

Tonight, the federal budget is announced. Given the economy has been heavily supported by fiscal and monetary policy since covid the budget will be more consequential to the outlook than usual.

Josh Stewart

Associate - Money Markets