The February NAB Monthly Business Survey gave back the surprisingly strong gains seen in the previous month although both conditions and confidence remain at above average levels. Some payback was flagged in last month’s Survey, as temporary factors were thought to have been behind much of the spike in both business conditions and confidence.
However, despite the pull-back, both of these indicators remain at levels consistent with solid business activity in the near-term, and are higher than through much of H2 2016. There are still some points of concern such as the persistent weakness evident in retail conditions, which warrant close monitoring.
Additionally, it is the longer-term growth picture that is more concerning, particularly as the contribution from LNG exports, temporarily higher commodity prices and the residential construction boom fade, putting pressure on the labour market. However, the RBA is increasingly putting emphasis on financial stability concerns, which is likely to impact the response of monetary policy.
NAB Economics will release updated financial and economic forecasts tomorrow.