The Economy: Business Confidence/Conditions Okay

  The National Australia Bank says business confidence and conditions were mixed & #160;in June.The business conditions index rose 2 points to 8 in June, driven by a stronger mining sector.But confidence eased to a reading of four, down from five in May, according to the bank's latest business survey. & quot;Further falls in mining (survey predated the change in the mining & #160;tax) and manufacturing confidence were offset by better readings in retail and wholesale confidence, & quot; the bank said yesterday. & quot;Confidence remained strongest in manufacturing, despite the decline, followed by retail, recreation & #38; personal services, wholesale and construction. & quot;Confidence was weakest in mining and transport. & quot;Business conditions moved higher on the back of better performances in & #160;trading (especially mining). Profitability also improved. & quot;Overall retail & #160;conditions remained at relatively weak levels, while very strong & #160;conditions continue to be reported in mining, construction and finance. & quot;The NAB said the latest survey was conducted in the week ending 30 June and included the change of Prime Minister (on & #160;June 24) but not the revised minerals tax & #160;arrangements (a week later on July 2).''The moderation in the growth performance of the Australian economy in the March quarter continued into the June quarter,'' NAB chief economist, Alan Oster, said in yesterday's statement.''Business conditions have been trending sideways so far in 2010. & quot;In Australia, cautious consumers, rising interest rates, the passing of the fiscal stimulus, falling and volatile equity markets and concerns about European debt and Sino-American growth have slowed activity growth and new orders (especially retail). & quot;While Q2 GDP growth may again be around ½%, growth should strengthen thereafter from a rising terms of trade, strong major trading partner growth and falling unemployment. & quot;As a result the bank has left its economic forecasts steady after cutting them in May. & quot;Indeed the Survey reinforces the view that growth is still reasonable, & quot; the bank said.GDP growth of 2.75% in 2010 and 3.5% in 2011 is expected while & #160;unemployment will fall to & #160;4.75% & #160;late this year (It was 5.1% in June) & #160;and 4.5% by late 2011.As a result, the NAB sees interest rates on hold until late 2010, then two rises to 5% by end year (and a peak of 5.5% in mid 2011).Its inflation forecast has been revised up to 3% by end 2010 and 2.75% in 2011. & quot;Global growth forecast increased to 4.5% in 2010 and 4.25% in 2011 - mainly due to surging Latin America (Brazil). & quot;Beyond that India, China and other East Asian economies continue to drive the recovery. & quot;US data imply slower growth but we still expect a touch over 3% in 2010. But European prospects remain extremely weak - with the risk of contagion still high. But double dip still seen as unlikely, & quot; the NAB reported.Elsewhere in the survey, & #160;the & #160;NAB said that labour costs & #160;eased in June & quot;consistent with the ongoing softness in employment & quot;. & quot;The strongest labour cost increases have occurred in mining. & quot;Growth in final product prices have picked up, particularly in the mining sector. However, retail price growth softened. & quot;Overall, domestic price pressures remain low at present, but a sustained tightening in the labour market could well produce increased wage and inflationary pressures. & quot;On the other hand a sustained increase in the & #36;A would help offset these inflationary pressures. & quot;The bank said business conditions recovered in June on the back of higher sales (up 4 points) and profitability (up 4 points). & quot;The Survey readings for forward orders suggest that domestic demand growth has been easing down a touch, to marginally less than 4%. & quot;However, if forward orders were to maintain the better June monthly level, that would be indicative of domestic demand returning to an annualised growth rate of around 4% in mid 2010, & quot; the NAB said. & #160;  

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