No one who is serious about understanding the economy misses the monthly NAB Business Survey.
This month’s slight fall in conditions (to 0 from 1) and improvement in confidence (from 4 to 6) is surprisingly positive given all the leaks about a harsh budget tomorrow.
It also suggests an underlying improvement in the economy is driving the improvement in confidence which is now strong enough for the NAB to formerly drop its call for the RBA to lower interest rates again this year. It does not believe an increase is imminent however with no rate rises expected until “late 2015”
NAB said Business confidence had returned to its long running average level, from post election lows last month. But it noted:
rise in confidence was a little surprising given negative rhetoric about a ‘tough budget.’ Other leading indicators in the survey still soft and seemingly not the source of better sentiment. Broader macro indicators are looking a little more positive – including the labour market – and may be helping confidence, which is highest in finance/ property/ business and retail.
The dip in conditions, however, showed a continuation of a sluggish economy, NAB said.
Forward orders are clearly a concern. But the improving employment situation is a positive sign for the months ahead, and further increases in employment are expected.
It’s now up to Joe Hockey and his budget to set the tone for conditions and confidence for the rest of 2014.
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