NAB’s monthly business survey for May has just been released and it shows exactly the type of business resilience that might be able to counter consumer pessimism.
The survey was conducted between May 26 and June 3 which gave business plenty of time to reflect on the budget’s poor public reception and the crash in consumer sentiment.
But while headline business conditions fell one point to -1 headline confidence stayed solid at +7.
That’s good news but even better for the economy and job prospects, is the employment sub index didn’t deteriorate and remains at 0 while forward orders surged from -5 to flat while stocks and exports rose one and two points respectively to 1.
Sure this survey doesn’t speak of a raging economy with NAB still forecasting a 6.25% peak in the unemployment rate while also holding the view that the transition to mining has yet to come through. Indeed NAB sees domestic demand of only 1% in 2014 and less in 2015.
But NAB expects overall GDP growth to come in at 3% (up from 2.9%) and the fact that business is not looking to shed jobs in this survey coupled with the bank’s statement that “service industries remain the stand out performers” suggests there is some upside to its pessimism.
Overall this is exactly the response from business that the economy needs. If business holds firm and continues to hire then consumer confidence will recover the steep falls that we saw over the past five or six weeks as a result of the budget leaks and reality.
Time will tell but this looks like good news for the economy as it implies growth around trend but no need for the RBA to increase interest rates any time soon.
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