Australian NAB Business Condition dropped again in May to 1, down from 3. Private sector continues to lose momentum. Goods distribution industries remain particularly weak, and manufacturing is not far behind. Business Confidence jumped from 0 to 7, in a post-election spike, as well as on RBA rate cut expectations. However, forward looking indicators suggest more weakness lies ahead.
Alan Oster, NAB Group Chief Economist noted “business confidence saw a sharp increase in the month following the Federal election and a confirmation from the RBA that rates would be cut in June. We think this will be a short-term spike given other forward-looking indicators saw further deterioration in the month. Forward orders declined further and in addition to being well below average are negative. Capacity utilisation has also pulled back in 2019 to date and is now a touch below average”.
“While confidence, at least at face value was a positive outcome, business conditions deteriorated further. Trading conditions and profits are particularly weak. The employment index which we are watching closely, partially reversed some of its decline last month, but is only around average”.
EUR/AUD breached 1.6262 resistance late yesterday as rise from 1.5683 is resuming. Next near term target is 61.8% projection of 1.5683 to 1.6262 from 1.6052 at 1.6410.
