The strength witnessed in last month’s NAB Monthly Business Survey continued into January, with both business conditions and confidence jumping to much higher levels. While these outcomes are certainly pointing to an improvement in the domestic economy after a soft patch through much of H2 2016, a degree of caution should still be exercised given the diverse and rapidly changing seasonal influences at this time of year (which potentially includes the shift in Chinese New Year to January this year). Additionally, on-going weakness in retail conditions, despite an improvement in the month, raises some concerns about the underlying strength of household consumption.
Looking further ahead, NAB Economics still have concerns for the longer-term growth picture, as the contribution from LNG exports, temporarily higher commodity prices and the residential construction boom fade, keeping pressure on the labour market. Nevertheless, in light of the recent flow of data, NAB’s economic forecasts (which include expectations for the RBA’s cash rate) are currently under review – to be published tomorrow.
Read the full survey for January 2017.