The National’s excellent economic
team has somewhat changed its tune toward Henry’s view of a stronger
economy. But its overall summary is: “Business conditions in June
remain broadly unchanged – around the surprisingly high levels reported
- Stronger trading conditions offset by falls in profitability and employment.
- Business confidence also Broadly unchanged – albeit at much lower levels.
- Other key measures also similar to May – new orders down while capacity utilisation up a bit.
- Non-residential construction and retailing contributing most to recent strength.
- Wage pressures broadly unchanged – but slowing in annual rate terms.
- Price pressures – especially retail – continue to Increase.
- National’s growth forecasts unchanged – 2% for 2004/05 and 2.75% in 2005/06.
- RBA still firmly on hold – we also still favour a cash rate cut in early 2006.
- But risks rising, that if growth stronger, this cut may not eventuate.
Read more here.