Australian firms felt slightly less confident about the outlook for growth in July, with perceptions of business conditions sliding a few notches, however, the RBA‘s latest rate cut may see spirits brighten again this month.
Sydney – The National Australia Bank Business (NAB) Confidence index fell from a revised 5 in June to 4 last month, while the NAB Business Conditions index went from 12 to 8.
A reading above zero signals an improvement in business conditions, and a reading below zero indicates a deterioration.
The RBA acknowledged that while business investment had been declining sharply, the economy as a whole was continuing to expand at a moderate pace.
A key concern for the RBA, and no doubt many businesses, is the strength of the Australian dollar. In the RBA’s August Statement on Monetary Policy (SoMP), released Friday, the bank said that the exchange rate is a significant source of uncertainty for growth and inflation.
The Australian dollar depreciated sharply between mid-2011 and late 2015, but has since experienced a bout of strength. The AUD/USD currently trades around 11% higher than its late-January trough, and on a TWI basis is around 7% higher.
Rebounding commodity prices are part of the reason the exchange rate has strengthened over the last six months, as well as the market’s lower expectations for Federal Reserve (Fed) tightening.Click here for reuse options!