According to Alan Oster, NAB Group Chief Economist “The business conditions index rebounded a little in August, and while it is someway off the highs earlier in the year, it remains well above average. This is a welcome sign of a stabilisation in business conditions”.
“The rise business conditions August was driven by an improvement in both profitability and trading conditions, while the employment index was unchanged” s
“The employment index continues to suggest growth in employment of around 23k per month over the next 6 months. With a stabilisation in the labour force participation rate, this should be enough to see the unemployment rate decline further over the rest of 2018”.
Conditions rose in mining and manufacturing in August and though retail showed some improvement, conditions in the sector are still negative. Most of the remaining industries saw declines in the month – with conditions in the construction sector declining noticeably.
Conditions in construction remain elevated, reflecting the large pipeline of residential and non-residential work as well as spill overs from public sector investment.
Capacity utilisation remains high and the profitability index remains well above average. This suggests investment in the business sector should continue to grow. Further, the employment index continues to show a pace of employment growth greater than that of the population which should see the unemployment rate decline further. The dynamic around further declines in the unemployment rate and faster wage growth remain key to the outlook for monetary policy” Mr Oster said.

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