Retail’s “malaise” of GFC-level conditions continues in June

A post-election boost to business confidence seems to have faded in the month of June, having fallen 5 points after increasing over May, according to the latest NAB monthly business survey.

The decline was felt across industries, though remains highest in the mining industry, followed by finance, business and property services. Retail was the weakest of all sectors, and continues to show the “ongoing malaise” of GFC-level conditions. 

“Business confidence seems to have unwound its spike in May, which we think was driven by a short-term election bounce and increased optimism around a renewed interest rate easing cycle by the RBA,” NAB Group chief economist Alan Oster said. 

“While business conditions increased slightly in the month, they remain well below average after trending lower for over a year now.”

It appears unlikely that conditions or confidence will improve over the next few months, Oster said.

Specifically, the survey posits that activity in the retail sector is going backwards – with price and volumes growth appearing weak, and margins continuing to face pressure.

To make matters worse, while many pinned hopes of increased spending on the recent RBA cash rate decrease, as well as the passing of the Coalition government’s tax package last week, consumer confidence has actually decreased since these developments last week, according to the latest ANZ-Roy Morgan Australian Consumer Confidence report

“Confidence fell 1.1 per cent, despite the RBA’s second rate cut. The passage of the tax cuts has also not been an immediate boost to sentiment,” said ANZ head of Australian economics David Plank.

“Interestingly, confidence also fell immediately following the June RBA rate cut, suggesting the immediate take-away from monetary easing is not necessarily positive.”

Plank put the fall into context, however, noting that the prior week had seen a 4 per cent increase, and that some consolidation is not “entirely unexpected”.


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