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Australia NAB business condition rose to highest since 2007

Australia quarterly NAB business confidence was unchanged at 7 in Q1. Quarterly business conditions rose from 15 to 17.

Highlights from the release:

  • Business conditions (an average of trading conditions/sales, profitability and employment) increased by 2pts to +17, its highest level since 2007, although the monthly survey indicates conditions, while still strong, eased late in the quarter.
  • Business confidence was unchanged at +7 and it has been relatively stable since 2016 Q3, staying within a range of 6 to 8 pts, a little above its historical average of +5.
  • Overall, leading indicators continue to look positive, although there was some easing in expectations for the next three months.
  • Labour indicators point to a tightening labour market. While there is no upwards move yet in wage growth the conditions are in place for this to occur.

FINANCIAL MARKET EXPECTATIONS

  • On average, businesses are pricing in around an 80% probability of a 25bp rate hike in the next 12-months. NAB Economics’ view is that the RBA will want clear evidence that wages growth and inflation are moving higher before removing some policy accommodation, and we don’t expect sufficient evidence of this until late 2018 (with the first hike expected in November), with the risk that it occurs later.
  • Exchange rate expectations in the Survey (6-months-ahead) rose to almost US$0.78, which is around the average level at the time the Survey was taken.

Full release here.

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