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‘Upbeat’ business sector contrasts with ‘disheartened’ household sector

‘Upbeat’ business sector contrasts with ‘disheartened’ household sector

The question of how a disparity between “elevated” business conditions and a “disheartened” household sector will be resolved is “critical”, a business report has revealed.

The NAB Monthly Business Survey for May 2017, released earlier this week, remarked upon improvements in employment growth and a slight drop in business conditions to +12 index points, comfortably above the long-run average of +5.

Further, all industries reported positive business conditions during May, only the second time this has happened since 2010. The mining industry was found to have “bounced back considerably” in recent months, supported by elevated commodity prices.

Business confidence was also marginally above the long-run average, at +7 index points, but has fallen by 6 points since April – revealing that it is “less buoyant” than in April.

NAB said that this suggested there are “some peripheral factors still weighing on firms’ perceptions of the operation environment”.

Alan Oster, NAB’s chief economist commented of business conditions: “The business sector is looking quite upbeat, maintaining the apparent disconnect with a rather melancholy household sector.”

Mr Oster also observed softness in retail, but pointed to softer trends in the household sector as a possible contributing factor. He commented: “Solid outcomes from the NAB Monthly Business Survey signal a divergence in conditions between the business and household sectors of the economy. How the disparity resolves itself will be critical to the outlook for growth.”

Mr Oster added: “Optimists might point to solid employment conditions as providing the much-needed catalyst to lift the household sector out of its current funk. However, significant structural headwinds still pose a hurdle that will prove difficult to overcome, keeping wages growth subdued and consumers cautious with their spending.”

NAB predicts economic growth will accelerate in the second half of 2017, however there is uncertainty looking further into the future as growth drivers like LNG exports, commodity prices and housing construction begin to weaken.

[Related: Delinquency rates on the rise in 2017]

‘Upbeat’ business sector contrasts with ‘disheartened’ household sector
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