Australia Business Confidence May 2016


Business confidence moderates in May

The business confidence index published by the National Australia Bank (NAB) fell from five points in April to three points in May. The indicator is still above the 0-point threshold, which means that Australian businesses are relatively more optimistic regarding economic conditions in the coming months. Nevertheless, the fall puts the figure further below the long-term average of six points.

According to the NAB, uncertainty stemming from the upcoming 2 July elections may have had an impact; however, the fact that the deterioration in confidences was not uniformly spread across industries suggests that there are other factors at play. Outside of mining, business confidence was non-negative. Construction and wholesale saw the largest gains, while transport saw a strong decline but remained in positive territory, which may be the result of an increase the price of fuel. The NAB commented that, “despite steady business conditions and an interest rate cut by the RBA (unanticipated by many), confidence dropped back further below the series average in May.”

FocusEconomics Consensus Forecast panelists see fixed investment contracting 3.4% in 2016, which is down 0.4 percentage points from last month’s forecast. For 2017, the panel sees investment falling 0.2%.

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Australia Business Confidence Chart

Australia Business Confidence May 2016 1

Note: Index of business sentiment; 0-point threshold indicates equal number of positive and negative responses.
Source: National Australia Bank’s Monthly Business Survey.

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